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Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | manufacture, of predicting the future demand for various parts, taxpayer produced liberal quantities of each part to avoid subsequent production *526 runs. Additional runs entail costly retooling and result in delays in filling orders. App. 54-55. In 1960, Thor instituted a procedure for writing down the inventory value of replacement parts and accessories for tool models it no longer produced. It created an inventory contra-account and credited that account with 10% of each part's cost for each year since production of the parent model had ceased. -7; App. 24. The effect of the procedure was to amortize the cost of these parts over a 10-year period. For the first nine months of 1964, this produced a write-down of $22, ; App. 24. In late 1964, new management took control and promptly concluded that Thor's inventory in general was overvalued.[1] After "a physical inventory taken at all locations" of the tool and rubber divisions, management wrote off approximately $2.75 million of obsolete parts, damaged or defective tools, demonstration or sales samples, and similar items. -53. The Commissioner allowed this writeoff because Thor scrapped most of the articles shortly after their removal from the 1964 closing inventory.[2] Management also wrote down $245,000 of parts stocked for three unsuccessful products. *527 The Commissioner allowed this write-down, too, since Thor sold these items at reduced prices shortly after the close of 1964. This left some 44,000 assorted items, the status of which is the inventory issue here. Management concluded that many of these articles, mostly spare parts,[3] were "excess" inventory, that is, that they were held in excess of any reasonably foreseeable future demand. It was decided that this inventory should be written down to its "net realizable value," which, in most cases, was scrap -161; Brief for Petitioner 9; Tr. of Oral Arg. 11. Two methods were used to ascertain the quantity of excess inventory. Where accurate data were available, Thor forecast future demand for each item on the basis of actual 1964 usage, that is, actual sales for tools and service parts, and actual usage for raw materials, work-in-process, and production parts. Management assumed that future demand for each item would be the same as it was in 1964. Thor then applied the following aging schedule: the quantity of each item corresponding to less than one year's estimated demand was kept at cost; the quantity of each item in excess of two years' estimated demand was written off entirely; and the quantity of each item corresponding to from one to two years' estimated demand was written down by 50% or 75%. App. |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | estimated demand was written down by 50% or 75%. App. 26.[4] Thor presented no statistical evidence to rationalize *528 these percentages or this time frame. In the Tax Thor's president justified the formula by citing general business experience, and opined that it was "somewhat in between" possible alternative solutions.[5] This first method yielded a total write-down of $744, *529 At two plants where 1964 data were inadequate to permit forecasts of future demand, Thor used its second method for valuing inventories. At these plants, the company employed flat percentage write-downs of 5%, 10%, and 50% for various types of inventory.[6] Thor presented no sales or other data to support these percentages. Its president observed that "this is not a precise way of doing it," but said that the company "felt some adjustment of this nature was in order, and these figures represented our best estimate of what was required to reduce the inventory to net realizable " App. 67. This second method yielded a total write-down of $160, Although Thor wrote down all its "excess" inventory at once, it did not immediately scrap the articles or sell them at reduced prices, as it had done with the $3 million of obsolete and damaged inventory, the write-down of which the Commissioner permitted. Rather, Thor retained the "excess" items physically in inventory and continued to sell them at original prices. The company found that, owing to the peculiar nature of the articles involved,[7] price reductions were of no avail in moving this "excess" inventory. *530 As time went on however, Thor gradually disposed of some of these items as scrap; the record is unclear as to when these dispositions took place.[8] Thor's total write-down of "excess" inventory in 1964 therefore was: Ten-year amortization of parts for discontinued tools $22,090 First method (aging formula based on 1964 usage) 744,030 Second method (flat percentage write-downs) 160,832 Total $926,952 Thor credited this sum to its inventory contra-account, thereby decreasing closing inventory, increasing cost of goods sold, and decreasing taxable income for the year by that amount.[9] The company contended that, by writing down excess inventory to scrap value, and by thus carrying all inventory at "net realizable value," it had reduced its inventory to "market" in accord with its "lower of cost or market" method of accounting. On audit, the Commissioner disallowed the write-down in its entirety, asserting that it did not serve clearly to reflect Thor's 1964 income for tax purposes. The Tax in upholding the Commissioner's determination, found as a fact that Thor's write-down of excess inventory did conform to "generally accepted accounting |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | write-down of excess inventory did conform to "generally accepted accounting principles"; indeed, the court was "thoroughly convinced that such was the case." The court found that if Thor had failed to write down its inventory on some reasonable *531 basis, its accountants would have been unable to give its financial statements the desired certification. The court held, however, that conformance with "generally accepted accounting principles" is not enough; 446 and 471 as well, of the 1954 Code, 26 U.S. C. 446 and 471, prescribe, as an independent requirement, that inventory accounting methods must "clearly reflect income." The Tax rejected Thor's argument that its write-down of "excess" inventory was authorized by Treasury -171, and held that the Commissioner had not abused his discretion in determining that the write-down failed to reflect 1964 income clearly. B Inventory accounting is governed by 446 and 471 of the Code, 26 U.S. C. 446 and 471. Section 446 states the general rule for methods of accounting: "Taxable income shall be computed under the method of accounting on the basis of which the taxpayer regularly computes his income in keeping his books." Section 446 provides, however, that if the method used by the taxpayer "does not clearly reflect income, the computation of taxable income shall be made under such method as, in the opinion of the [Commissioner], does clearly reflect income." promulgated under 446, and in effect for the taxable year 1964, state that "no method of accounting is acceptable unless, in the opinion of the Commissioner, it clearly reflects income." Treas. Reg. 1.446-1 (2), 26 CFR 1.446-1 (2) (1964).[10] Section 471 prescribes the general rule for inventories. It states: "Whenever in the opinion of the [Commissioner] the use *532 of inventories is necessary in order clearly to determine the income of any taxpayer, inventory shall be taken by such taxpayer on such basis as the [Commissioner] may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income." As the point out, 471 obviously establishes two distinct tests to which an inventory must conform. First, it must conform "as nearly as may be" to the "best accounting practice," a phrase that is synonymous with "generally accepted accounting principles." Second, it "must clearly reflect the income." Treas. Reg. 1.471-2 (2), 26 CFR 1.471-2 (2) (1964). It is obvious that on their face, 446 and 471, with their accompanying vest the Commissioner with wide discretion in determining whether a particular method of inventory accounting should be disallowed as not clearly reflective of income. |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | accounting should be disallowed as not clearly reflective of income. This 's cases confirm the breadth of this discretion. In construing 446 and its predecessors, the has held that "[t]he Commissioner has broad powers in determining whether accounting methods used by a taxpayer clearly reflect income." Since the Commissioner has "[m]uch latitude for discretion," his interpretation of the statute's clear-reflection standard "should not be interfered with unless clearly unlawful." To the same effect are United ; ; American Automobile ; Automobile Club of ; In construing of the Revenue Act of 1918, a predecessor of 471, the held that the taxpayer bears a "heavy burden of [proof]," and that the Commissioner's disallowance *533 of an inventory accounting method is not to be set aside unless shown to be "plainly arbitrary." As has been noted, the Tax found as a fact in this case that Thor's write-down of "excess" inventory conformed to "generally accepted accounting principles" and was "within the term, `best accounting practice,' as that term is used in section 471 of the Code and the regulations promulgated under that section." 165. Since the Commissioner has not challenged this finding, there is no dispute that Thor satisfied the first part of 471's two-pronged test. The only question, then, is whether the Commissioner abused his discretion in determining that the write-down did not satisfy the test's second prong in that it failed to reflect Thor's 1964 income clearly. Although the Commissioner's discretion is not unbridled and may not be arbitrary, we sustain his exercise of discretion here, for in this case the write-down was plainly inconsistent with the governing which the taxpayer, on its part, has not challenged.[11] It has been noted above that Thor at all pertinent times used the "lower of cost or market" method of inventory accounting. The rules governing this method are set out in Treas. Reg. *534 1.471-4, 26 CFR 1.471-4 (1964). That Regulation defines "market" to mean, ordinarily, "the current bid price prevailing at the date of the inventory for the particular merchandise in the volume in which usually purchased by the taxpayer." 1.471-4 The courts have uniformly interpreted "bid price" to mean replacement cost, that is, the price the taxpayer would have to pay on the open market to purchase or reproduce the inventory items.[12] Where no open market exists, the require the taxpayer to ascertain "bid price" by using "such evidence of a fair market price at the date or dates nearest the inventory as may be available, such as specific purchases or sales by the taxpayer or others in reasonable volume and |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | sales by the taxpayer or others in reasonable volume and made in good faith, or compensation paid for cancellation of contracts for purchase commitments." 1.471-4 The specify two situations in which a taxpayer is permitted to value inventory below "market" as so defined. The first is where the taxpayer in the normal course of business has actually offered merchandise for sale at prices lower than replacement Inventories of such merchandise may be valued at those prices less direct cost of disposition, "and the correctness of such prices will be determined by reference to the actual sales of the taxpayer for a reasonable period before and after the date of the inventory." The warn that prices "which vary materially from the *535 actual prices so ascertained will not be accepted as reflecting the market." The second situation in which a taxpayer may value inventory below replacement cost is where the merchandise itself is defective. If goods are "unsalable at normal prices or unusable in the normal way because of damage, imperfections, shop wear, changes of style, odd or broken lots, or other similar causes," the taxpayer is permitted to value the goods "at bona fide selling prices less direct cost of disposition." 1.471-2 The define "bona fide selling price" to mean an "actual offering of goods during a period ending not later than 30 days after inventory date." The taxpayer bears the burden of proving that "such exceptional goods as are valued upon such selling basis come within the classifications indicated," and is required to "maintain such records of the disposition of the goods as will enable a verification of the inventory to be made." From this language, the regulatory scheme is clear. The taxpayer must value inventory for tax purposes at cost unless the "market" is lower. "Market" is defined as "replacement cost," and the taxpayer is permitted to depart from replacement cost only in specified situations. When it makes any such departure, the taxpayer must substantiate its lower inventory valuation by providing evidence of actual offerings, actual sales, or actual contract cancellations. In the absence of objective evidence of this kind, a taxpayer's assertions as to the "market value" of its inventory are not cognizable in computing its income tax. It is clear to us that Thor's procedures for writing down the value of its "excess" inventory were inconsistent with this regulatory scheme. Although Thor conceded that "an active market prevailed" on the inventory date, see it "made no effort to determine the purchase or reproduction cost" of its "excess" inventory. Thor thus failed to ascertain "market" in accord |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | "excess" inventory. Thor thus failed to ascertain "market" in accord with the general rule of the *536 In seeking to depart from replacement cost, Thor failed to bring itself within either of the authorized exceptions. Thor is not able to take advantage of 1.471-4 since, as the Tax found, the company failed to sell its excess inventory or offer it for sale at prices below replacement -161. Indeed, Thor concedes that it continued to sell its "excess" inventory at original prices. Thor also is not able to take advantage of 1.471-2 since, as the Tax and the of Appeals both held, it failed to bear the burden of proving that its excess inventory came within the specified ; 563 F. 2d, at 867. Actually, Thor's "excess" inventory was normal and unexceptional, and was indistinguishable from and intermingled with the inventory that was not written down. More importantly, Thor failed to provide any objective evidence whatever that the "excess" inventory had the "market value" management ascribed to it. The demand hard evidence of actual sales and further demand that records of actual dispositions be kept. The Tax found, however, that Thor made no sales and kept no records. Thor's management simply wrote down its closing inventory on the basis of a well-educated guess that some of it would never be sold. The formulae governing this write-down were derived from management's collective "business experience"; the percentages contained in those formulae seemingly were chosen for no reason other than that they were multiples of five and embodied some kind of anagogical symmetry. The do not permit this kind of evidence. If a taxpayer could write down its inventories on the basis of management's subjective estimates of the goods' ultimate salability, the taxpayer would be able, as the Tax observed, "to determine how much tax it wanted to pay for a given year."[13] *537 For these reasons, we agree with the Tax and with the Seventh that the Commissioner acted within his discretion in deciding that Thor's write-down of "excess" *538 inventory failed to reflect income clearly. In the light of the well-known potential for tax avoidance that is inherent in inventory accounting,[14] the Commissioner in his discretion may insist on a high evidentiary standard before allowing write-downs of inventory to "market." Because Thor provided no objective evidence of the reduced market value of its "excess" inventory, its write-down was plainly inconsistent with the and the Commissioner properly disallowed it.[] C The taxpayer's major argument against this conclusion is based on the Tax 's clear finding that the write-down conformed to "generally accepted accounting |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | clear finding that the write-down conformed to "generally accepted accounting principles." Thor points to language in Treas. Reg. 1.446-1 (2), 26 CFR 1.446-1 (2) (1964), to the effect that "[a] method of accounting which reflects the consistent application of generally *539 accepted accounting principles will ordinarily be regarded as clearly reflecting income" (emphasis added). Section 1.471-2 26 CFR 1.471-2 (1964), of the likewise stated that an inventory taken in conformity with best accounting practice "can, as a general rule, be regarded as clearly reflecting income" (emphasis added).[16] These provisions, Thor contends, created a presumption that an inventory practice conformable to "generally accepted accounting principles" is valid for income tax purposes. Once a taxpayer has established this conformity, the argument runs, the burden shifts to the Commissioner affirmatively to demonstrate that the taxpayer's method does not reflect income clearly. Unless the Commissioner can show that a generally accepted method "demonstrably distorts income," Brief for Chamber of Commerce of the United States *540 as Amicus Curiae 3, or that the taxpayer's adoption of such method was "motivated by tax avoidance," Brief for Petitioner 25, the presumption in the taxpayer's favor will carry the day. The Commissioner, Thor concludes, failed to rebut that presumption here. If the Code and did embody the presumption petitioner postulates, it would be of little use to the taxpayer in this case. As we have noted, Thor's write-down of "excess" inventory was inconsistent with the ; any general presumption obviously must yield in the face of such particular inconsistency. We believe, however, that no such presumption is present. Its existence is insupportable in light of the statute, the 's past decisions, and the differing objectives of tax and financial accounting. First, as has been stated above, the Code and establish two distinct tests to which an inventory must conform. The Code and moreover, leave little doubt as to which test is paramount. While 471 of the Code requires only that an accounting practice conform "as nearly as may be" to best accounting practice, 1.446-1 (2) of the states categorically that "no method of accounting is acceptable unless, in the opinion of the Commissioner, it clearly reflects income" (emphasis added). Most importantly, the Code and give the Commissioner broad discretion to set aside the taxpayer's method if, "in [his] opinion," it does not reflect income clearly. This language is completely at odds with the notion of a "presumption" in the taxpayer's favor. The embody no presumption; they say merely that, in most cases, generally accepted accounting practices will pass muster for tax purposes. And in most cases they will. |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | muster for tax purposes. And in most cases they will. But if the Commissioner, in the exercise of his discretion, determines that they do not, he may prescribe a different practice without having to rebut any presumption running against the Treasury. *541 Second, the presumption petitioner postulates finds no support in this 's prior decisions. It was early noted that the general rule specifying use of the taxpayer's method of accounting "is expressly limited to cases where the Commissioner believes that the accounts clearly reflect the net income." 280 U. S., at More recently, it was held in American Automobile that a taxpayer must recognize prepaid income when received, even though this would mismatch expenses and revenues in contravention of "generally accepted commercial accounting principles." "[T]o say that in performing the function of business accounting the method employed by the Association `is in accord with generally accepted commercial accounting principles and practices,'" the concluded, "is not to hold that for income tax purposes it so clearly reflects income as to be binding on the Treasury." "[W]e are mindful that the characterization of a transaction for financial accounting purposes, on the one hand, and for tax purposes, on the other, need not necessarily be the same." Frank Lyon v. United States, See Commissioner v. Idaho Power Indeed, the 's cases demonstrate that divergence between tax and financial accounting is especially common when a taxpayer seeks a current deduction for estimated future expenses or losses. E. g., ; ; The rationale of these cases amply encompasses Thor's aim. By its president's concession, the company's write-down of "excess" inventory was founded on the belief that many of the articles inevitably would become useless *542 due to breakage, technological change, fluctuations in market demand, and the like.[17] Thor, in other words, sought a current "deduction" for an estimated future loss. Under the decided cases, a taxpayer so circumstanced finds no shelter beneath an accountancy presumption. Third, the presumption petitioner postulates is insupportable in light of the vastly different objectives that financial and tax accounting have. The primary goal of financial accounting is to provide useful information to management, shareholders, creditors, and others properly interested; the major responsibility of the accountant is to protect these parties from being misled. The primary goal of the income tax system, in contrast, is the equitable collection of revenue; the major responsibility of the Internal Revenue Service is to protect the public fisc. Consistently with its goals and responsibilities, financial accounting has as its foundation the principle of conservatism, with its corollary that "possible errors in measurement [should] be |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | with its corollary that "possible errors in measurement [should] be in the direction of understatement rather than overstatement of net income and net assets."[18] In view of the Treasury's markedly different goals and responsibilities, understatement of income is not destined to be its guiding light. Given this diversity, even contrariety, *543 of objectives, any presumptive equivalency between tax and financial accounting would be unacceptable.[19] This difference in objectives is mirrored in numerous differences of treatment. Where the tax law requires that a deduction be deferred until "all the events" have occurred that will make it fixed and certain, United accounting principles typically require that a liability be accrued as soon as it can reasonably be estimated.[20] Conversely, where the tax law requires that income be recognized currently under "claim of right," "ability to pay," and "control" rationales, accounting principles may defer accrual until a later year so that revenues and expenses may be better matched.[21] Financial accounting, in short, is hospitable to estimates, probabilities, and reasonable certainties; the tax law, with its mandate to preserve the revenue, can give no quarter to uncertainty. This is as it should be. Reasonable estimates may be useful, even essential, in giving shareholders and creditors an accurate picture of a firm's overall financial health; but the accountant's conservatism cannot bind the Commissioner in his efforts to collect taxes. "Only a few reserves voluntarily established as a matter *544 of conservative accounting," Mr. Justice Brandeis wrote for the "are authorized by the Revenue Acts." -202. Finally, a presumptive equivalency between tax and financial accounting would create insurmountable difficulties of tax administration. Accountants long have recognized that "generally accepted accounting principles" are far from being a canonical set of rules that will ensure identical accounting treatment of identical transactions.[22] "Generally accepted accounting principles," rather, tolerate a range of "reasonable" treatments, leaving the choice among alternatives to management. Such, indeed, is precisely the case here.[23] Variances of this sort may be tolerable in financial reporting, but they are questionable in a tax system designed to ensure as far as possible that similarly situated taxpayers pay the same tax. If management's election among "acceptable" options were dispositive for tax purposes, a firm, indeed, could decide unilaterallywithin limits dictated only by its accountantsthe tax it wished to pay. Such unilateral decisions would not just make the Code inequitable; they would make it unenforceable. *545 D Thor complains that a decision adverse to it poses a dilemma. According to the taxpayer, it would be virtually impossible for it to offer objective evidence of its "excess" inventory's lower value, since the |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | objective evidence of its "excess" inventory's lower value, since the goods cannot be sold at reduced prices; even if they could be sold, says Thor, their reduced-price sale would just "pull the rug out" from under the identical "non-excess" inventory Thor is trying to sell simultaneously. The only way Thor could establish the inventory's value by a "closed transaction" would be to scrap the articles at once. Yet immediate scrapping would be undesirable, for demand for the parts ultimately might prove greater than anticipated. The taxpayer thus sees itself presented with "an unattractive Hobson's choice: either the unsalable inventory must be carried for years at its cost instead of net realizable value, thereby overstating taxable income by such overvaluation until it is scrapped, or the excess inventory must be scrapped prematurely to the detriment of the manufacturer and its customers." Brief for Petitioner 25. If this is indeed the dilemma that confronts Thor, it is in reality the same choice that every taxpayer who has a paper loss must face. It can realize its loss now and garner its tax benefit, or it can defer realization, and its deduction, hoping for better luck later. Thor, quite simply, has suffered no present loss. It deliberately manufactured its "excess" spare parts because it judged that the marginal cost of unsalable inventory would be lower than the cost of retooling machinery should demand surpass expectations. This was a rational business judgment and, not unpredictably, Thor now has inventory it believes it cannot sell. Thor, of course, is not so confident of its prediction as to be willing to scrap the "excess" parts now; it wants to keep them on hand, just in case. This, too, is a rational judgment, but there is no reason why the Treasury should subsidize Thor's hedging of its bets. There *546 is also no reason why Thor should be entitled, for tax purposes, to have its cake and to eat it too. II The Bad-Debt Issue A Deductions for bad debts are covered by 166 of the 1954 Code, 26 U.S. C. 166. Section 166 (1) sets forth the general rule that a deduction is allowed for "any debt which becomes worthless within the taxable year." Alternatively, the Code permits an accrual-basis taxpayer to account for bad debts by the reserve method. This is implemented by 166 which states that "[i]n lieu of any deduction under subsection there shall be allowed (in the discretion of the [Commissioner]) a deduction for a reasonable addition to a reserve for bad debts." A "reasonable" addition is the amount necessary to bring |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | debts." A "reasonable" addition is the amount necessary to bring the reserve balance up to the level that can be excepted to cover losses properly anticipated on debts outstanding at the end of the tax year. At all times pertinent, Thor has used the reserve method. Its reserve at the beginning of 1965 was approximately $93,000. See 64 T.C., During 1965, Thor's new management undertook a stringent review of accounts receivable. In the company's rubber division, credit personnel studied all accounts; a 100% reserve was set up for two accounts deemed wholly uncollectible, and a 1% reserve was established for all other In the tool division, credit clerks analyzed all accounts more than 90 days past due with balances over $100; a 100% reserve was established for accounts judged wholly uncollectible, and an identical collectibility ratio was applied to accounts under $100 of the same age. A flat 2% reserve was set up for accounts more than 30 days past due, and a 1% reserve for all other accounts. -163. These judgments, approved by three levels of management, indicated that $136,0 should be added to *547 the bad-debt reserve, bringing its balance at year-end to a figure slightly below $229,000. Thor claimed this $136,0 as a deduction under 166 The Commissioner ruled that the deduction was excessive. He computed what he believed to be a "reasonable" addition to Thor's reserve by using the "six-year moving average" formula derived from the decision in Black Motor v. Commissioner, 41 B. T. A. 300 (1940), aff'd on other grounds, This formula seeks to ascertain a "reasonable" addition to a bad-debt reserve in light of the taxpayer's recent chargeoff history.[24] In this case, the formula indicated that, for the years 1960-1965, Thor's annual chargeoffs of bad debts amounted, on the average, to 3.128% of its year-end Applying that percentage to Thor's 1965 year-end receivables, the Commissioner determined that $4,6.80 of accounts receivable could reasonably be expected to default. The amount required to bring Thor's reserve up to this level was $61,359.20, and the Commissioner decided that this was a "reasonable" addition. Accordingly, he disallowed the remaining $74,790.80 of Thor's claimed 166 deduction. Both the Tax -175, and the Seventh held that the Commissioner had not abused his discretion in so ruling. B Section 166 states that a deduction for an addition to a bad-debt reserve is to be allowed "in the discretion" of the Commissioner. Consistently with this statutory language, the courts uniformly have held that the Commissioner's determination of a "reasonable" (and hence deductible) addition *548 must be sustained unless the taxpayer proves |
Justice Blackmun | 1,979 | 11 | majority | Thor Power Tool Co. v. Commissioner | https://www.courtlistener.com/opinion/109974/thor-power-tool-co-v-commissioner/ | deductible) addition *548 must be sustained unless the taxpayer proves that the Commissioner abused his discretion.[25] The taxpayer is said to bear a "heavy burden" in this respect.[26] He must show not only that his own computation is reasonable but also that the Commissioner's computation is unreasonable and arbitrary.[27] Since it first received the approval of the Tax in 1940, the Black Motor bad-debt formula has enjoyed the favor of all three branches of the Federal Government. The formula has been employed consistently by the Commissioner,[28] approved by the courts,[29] and collaterally recognized by the Congress.[30] Thor faults the Black Motor formula because of its retrospectively: By ascertaining current additions to a reserve by reference to past chargeoff experience, the formula *549 assertedly penalizes taxpayers who have delayed in making writeoffs in the past, or whose receivables have just recently begun to deteriorate. Petitioner's objection is not altogether irrational, but it falls short of rendering the formula arbitrary. Common sense suggests that a firm's recent credit experience offers a reasonable index of the credit problems it may suffer currently. And the formula possesses the not inconsiderable advantage of enhancing certainty and predictability in an area peculiarly susceptible of taxpayer abuse. In any event, after its 40 years of near-universal acceptance, we are not inclined to disturb the Black Motor formula now. Granting that Black Motor in principle is valid, then, the only question is whether the Commissioner abused his discretion in invoking the formula in this case. Of course, there will be casesindeed, the Commissioner has acknowledged that there are cases, see Rev. Rul. 1976-2 Cum. Bull. 45, 46in which the formula will generate an arbitrary result. If a taxpayer's most recent bad-debt experience is unrepresentative for some reason, a formula using that experience as data cannot be expected to produce a "reasonable" addition for the current year.[31] If the taxpayer suffers an extraordinary credit reversal (the bankruptcy of a major customer, for example), the "six-year moving average" formula will fail.[32] In such a case, where the taxpayer can point to conditions that will cause future debt collections to be less likely than in the past, the taxpayer is entitled toand the Commissioner is prepared to allowan addition larger than Black Motor would call for. See Rev. Rul. *550 In this case, however, as the Tax found, Thor "did not show that conditions at the end of 1965 would cause collection of accounts receivable to be less likely than in prior years." Indeed, the Tax "infer[red] from the entire record that collectibility was probably more likely at the end of |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | This case presents the question whether exhaustion of state administrative remedies is a prerequisite to an action under 42 U.S. C. 1983 (1976 ed., Supp. IV). Petitioner Georgia Patsy filed this action, alleging that her employer, Florida International University (FIU), had denied her employment opportunities solely on the basis of her race and sex. By a divided vote, the United Court of Appeals for the Fifth Circuit found that petitioner was required to exhaust "adequate and appropriate" administrative remedies, and remanded the case to the District Court to consider the adequacy of the administrative procedures. We granted certiorari, and reverse the decision of the Court of Appeals. I Petitioner alleges that even though she is well qualified and has received uniformly excellent performance evaluations from her supervisors, she has been rejected for more than 13 positions at FIU.[1] She further claims that FIU has unlawfully filled positions through intentional discrimination on the basis of race and sex. She seeks declaratory and injunctive relief or, in the alternative, damages.[2] *499 The United District Court for the Southern District of Florida granted respondent Board of Regents' motion to dismiss because petitioner had not exhausted available administrative remedies. On appeal, a panel of the Court of Appeals reversed, and remanded the case for further proceedings. The full court then granted respondent's petition for rehearing and vacated the panel decision. The Court of Appeals reviewed numerous opinions of this Court holding that exhaustion of administrative remedies was not required, and concluded that these cases did not preclude the application of a "flexible" exhaustion After canvassing the policy arguments in favor of an exhaustion requirement, the Court of Appeals decided that a 1983 plaintiff could be required to exhaust administrative remedies if the following minimum conditions are met: (1) an orderly system of review or appeal is provided by statute or agency rule; (2) the agency can grant relief more or less commensurate with the claim; (3) relief is available within a reasonable period of time; (4) the procedures are fair, are not unduly burdensome, and are not used to harass or discourage those with legitimate claims; and (5) interim relief is available, in appropriate cases, to prevent irreparable injury and to preserve the plaintiff's rights during the administrative process. Where these minimum standards are met, a court must further consider the particular administrative scheme, the nature of the plaintiff's interest, and the values served by the exhaustion doctrine in order to determine whether exhaustion should be required. The Court of Appeals remanded the case to the *500 District Court to determine whether exhaustion would |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | to the *500 District Court to determine whether exhaustion would be appropriate in this case. II The question whether exhaustion of administrative remedies should ever be required in a 1983 action has prompted vigorous debate and disagreement. See, e. g., Turner, When Prisoners Sue: A Study of Prisoner Section 1983 Cases in the Federal Courts, ; Note, ; Comment, Our resolution of this issue, however, is made much easier because we are not writing on a clean slate. This Court has addressed this issue, as well as related issues, on several prior occasions. Respondent suggests that our prior precedents do not control our decision today, arguing that these cases can be distinguished on their facts or that this Court did not "fully" consider the question whether exhaustion should be required. This contention need not detain us long. Beginning with we have on numerous occasions rejected the argument that a 1983 action should be dismissed where the plaintiff has not exhausted state administrative remedies. See ; ; ; ; ; ; Cf. ("When federal claims are premised on [ 1983] as they are here we have not required exhaustion of state judicial or administrative remedies, recognizing the paramount role Congress has assigned to the federal courts to protect constitutional rights"). Respondent may be correct in arguing that several of these decisions could have been based on traditional exceptions to the exhaustion doctrine. Nevertheless, this Court has stated *501 categorically that exhaustion is not a prerequisite to an action under 1983, and we have not deviated from that position in the 19 years since McNeese. Therefore, we do not address the question presented in this case as one of first impression. III Respondent argues that we should reconsider these decisions and adopt the Court of Appeals' exhaustion rule, which was based on This Court has never announced a definitive formula for determining whether prior decisions should be overruled or reconsidered. However, in we articulated four factors that should be considered. Two of these factors whether the decisions in question misconstrued the meaning of the statute as revealed in its legislative history and whether overruling these decisions would be inconsistent with more recent expressions of congressional intent are particularly relevant to our decision today.[3] Both concern legislative purpose, which is of paramount importance in the exhaustion context because Congress is vested with the power to prescribe the basic procedural scheme under which claims may be heard in federal courts. Of course, courts play an important role in determining the limits of an exhaustion requirement and may impose such a |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | limits of an exhaustion requirement and may impose such a requirement even where Congress has not expressly so provided. However, the initial question whether exhaustion is required should be answered by reference to congressional intent; and a court *502 should not defer the exercise of jurisdiction under a federal statute unless it is consistent with that intent.[4] Therefore, in deciding whether we should reconsider our prior decisions and require exhaustion of state administrative remedies, we look to congressional intent as reflected in the legislative history of the predecessor to 1983 and in recent congressional activity in this area. A In determining whether our prior decisions misconstrued the meaning of 1983, we begin with a review of the legislative history to 1 of the Civil Rights Act of 71, the precursor to 1983.[5] Although we recognize that the 71 Congress did not expressly contemplate the exhaustion question, we believe that the tenor of the debates over 1 supports our conclusion that exhaustion of administrative remedies in 1983 actions should not be judicially imposed. *503 The Civil Rights Act of 71, along with the Fourteenth Amendment it was enacted to enforce, were crucial ingredients in the basic alteration of our federal system accomplished during the Reconstruction Era. During that time, the Federal Government was clearly established as a guarantor of the basic federal rights of individuals against incursions by state power. As we recognized in "[t]he very purpose of 1983 was to interpose the federal courts between the and the people, as guardians of the people's federal rights to protect the people from unconstitutional action under color of state law, `whether that action be executive, legislative, or judicial.' " At least three recurring themes in the debates over 1 cast serious doubt on the suggestion that requiring exhaustion of state administrative remedies would be consistent with the intent of the 71 Congress. First, in passing 1, Congress assigned to the federal courts a paramount role in protecting constitutional rights. Representative Dawes expressed this view as follows: "The first remedy proposed by this bill is a resort to the courts of the United Is that a proper place in which to find redress for any such wrongs? If there be power to call into courts of the United an offender against these rights, privileges, and immunities, and hold him to an account there, either civilly or criminally, for their infringement, I submit to the calm and candid judgment of every member of this House that there is no tribunal so fitted, where equal and exact justice would be more likely to be |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | equal and exact justice would be more likely to be meted out in temper, in moderation, in severity, if need be, but always according to the law and the fact, as that great tribunal of the Constitution." Cong. Globe, 42d Cong., 1st Sess., 476 (71) (hereinafter Globe). *504 See also ; ; ;[6] The 71 Congress intended 1 to "throw open the doors of the United courts" to individuals who were threatened with, or who had suffered, the deprivation of constitutional rights, and to provide these individuals immediate access to the federal courts notwithstanding any provision of state law to the contrary. For example, Senator Edmunds, who introduced the bill in the Senate, stated in his closing remarks that the bill was similar in principle to an earlier act upheld by this Court in : "[T]he Supreme Court decided that it was the solemn duty of Congress under the Constitution to secure to the individual, in spite of the State, or with its aid, as the case might be, precisely the rights that the Constitution gave him, and that there should be no intermediate authority to arrest or oppose the direct performance of this duty by Congress." Globe 692 Similarly, Representative Elliott viewed the issue as whether "the Government of the United [has] the right, under the Constitution, to protect a citizen in the exercise of his vested rights as an American citizen by the assertion of immediate jurisdiction through its courts, without the appeal or agency of the State in which the citizen is domiciled." *505 See, e. g., ; ; ; Globe App. 141 (remarks of Rep. Shanks).[7] A second theme in the debates further suggests that the 71 Congress would not have wanted to impose an exhaustion requirement. A major factor motivating the expansion of federal jurisdiction through 1 and 2 of the bill was the belief of the 71 Congress that the state authorities had been unable or unwilling to protect the constitutional rights of individuals or to punish those who violated these rights. See, e. g., Globe 321 (remarks of Rep. Stoughton) ("The State authorities and local courts are unable or unwilling to check the evil or punish the criminals"); ("the local administrations have been found inadequate or unwilling to apply the proper corrective"); ; ; ; ; Globe App. 5 (remarks of Rep. Platt).[8]*506 Of primary importance to the exhaustion question was the mistrust that the 71 Congress held for the factfinding processes of state institutions. See, e. g., Globe 320 (testimony of Hon. Thomas Settle, Justice of the North Carolina Supreme Court, before |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | Thomas Settle, Justice of the North Carolina Supreme Court, before the House Judiciary Committee) ("The defect lies not so much with the courts as with the juries"); ; Globe App. 311 (remarks of Rep. Maynard). This Congress believed that federal courts would be less susceptible to local prejudice and to the existing defects in the factfinding processes of the state courts. See, e. g., Globe 322 (remarks of Rep. Stoughton);[9] This perceived defect in the ' factfinding processes is particularly relevant to the question of exhaustion of administrative remedies: exhaustion rules are often applied in deference to the superior factfinding ability of the relevant administrative agency. See, e. g., -196. A third feature of the debates relevant to the exhaustion question is the fact that many legislators interpreted the bill to provide dual or concurrent forums in the state and federal system, enabling the plaintiff to choose the forum in which to seek relief. Cf. For example, Senator Thurman noted: "I object to [ 1], first, because of the centralizing tendency of transferring all mere private suits, as well as *507 the punishment of offenses, from the State into the Federal courts. I do not say that this section gives to the Federal courts exclusive jurisdiction. I do not suppose that it is so understood. It leaves it, I presume, in the option of the person who imagines himself to be injured to sue in the State court or in the Federal court, an option that he who has been the least injured, but who has some malice to gratify, will be the most likely to avail himself of." Globe App. 216. See also Globe 578, 694-695 ; ; ; Globe App. 85 (remarks of Rep. Bingham) ("Admitting that the have concurrent power to enforce the Constitution of the United within their respective limits, must we wait for their action?"). This legislative history supports the conclusion that our prior decisions, holding that exhaustion of state administrative remedies is not a prerequisite to an action under 1983, did not misperceive the statutory intent: it seems fair to infer that the 71 Congress did not intend that an individual be compelled in every case to exhaust state administrative remedies before filing an action under 1 of the Civil Rights Act. We recognize, however, that drawing such a conclusion from this history alone is somewhat precarious: the 71 Congress was not presented with the question of exhaustion of administrative remedies, nor was it aware of the potential role of state administrative agencies. Therefore, we do not rely exclusively on this legislative history in |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | we do not rely exclusively on this legislative history in deciding the question presented here. Congress addressed the question of exhaustion under 1983 when it recently enacted 42 U.S. C. 1997e (1976 ed., Supp. IV). The legislative history of 1997e provides strong evidence of congressional intent on this issue. B The Civil Rights of Institutionalized Persons Act, 42 U.S. C. 1997 et seq. (1976 ed., Supp. IV), was enacted primarily *508 to ensure that the United Attorney General has "legal standing to enforce existing constitutional rights and Federal statutory rights of institutionalized persons." H. R. Conf. Rep. No. 96-897, p. 9 (Conf. Rep.). In 1997e, Congress also created a specific, limited exhaustion requirement for adult prisoners bringing actions pursuant to 1983. Section 1997e and its legislative history demonstrate that Congress understood that exhaustion is not generally required in 1983 actions, and that it decided to carve out only a narrow exception to this A judicially imposed exhaustion requirement would be inconsistent with Congress' decision to adopt 1997e and would usurp policy judgments that Congress has reserved for itself. In considering whether an exhaustion requirement should be incorporated into the bill, Congress clearly expressed its belief that a decision to require exhaustion for certain 1983 actions would work a change in the law. Witnesses testifying before the Subcommittee that drafted the bill discussed the decisions of this Court holding that exhaustion was not required. See, e. g., Hearings on H. R. 2439 and H. R. 5791 before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice of the House Committee on the Judiciary, 95th Cong., 1st Sess., 20 (1977) (1977 Hearings); ; Hearings on H. R. 10 before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice of the House Committee on the Judiciary, 96th Cong., 1st Sess., 48 (1979 Hearings). During these hearings, Representative Kastenmeier, Chairman of this Subcommittee, stated: "Another thing that I think requires some discussion within the committee, and is a point of argument, is whether there ought to be an exhaustion of remedies requirement. ". In fact, I think it has been pointed out that if [we] were to require it, particularly in 1983, that would constitute regression from the current state of the law. It would set the law back, because presently it is clearly *509 held, that is the Supreme Court has held, that in 1983 civil rights suits the litigant need not necessarily fully exhaust State remedies." 1977 Hearings 57-58. See also (Representative Railsback "grounds his bill on doing something which the Supreme Court has consistently refused to do, |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | something which the Supreme Court has consistently refused to do, namely require exhaustion of remedies"); 1979 Hearings 26 (adopting 1997e "was resisted as a possible encroachment on civil liberties; that is to say, in the free, unimpeded resort to 1983"). The debates over adopting an exhaustion requirement also reflect this understanding. See, e. g., 124 Cong. Rec. 11988 (remarks of Rep. Volkmer and Rep. Kastenmeier); ; ("it is settled law that an exhaustion of administrative remedies is not required as a precondition of maintaining a 1983 action"); 125 Cong. Rec. 12496 ("Under existing law there is no requirement that a complainant first ask the State prison system to help him"). With the understanding that exhaustion generally is not required, Congress decided to adopt the limited exhaustion requirement of 1997e in order to relieve the burden on the federal courts by diverting certain prisoner petitions back through state and local institutions, and also to encourage the to develop appropriate grievance procedures. See, e. g., Conf. Rep. 9; 124 Cong. Rec. 11976 ; ; ; ; ; ; Implicit in this decision is Congress' conclusion that the no-exhaustion rule should be left standing with respect to other 1983 suits. A judicially imposed exhaustion requirement would also be inconsistent with the extraordinarily detailed exhaustion *510 scheme embodied in 1997e. Section 1997e carves out a narrow exception to the general no-exhaustion rule to govern certain prisoner claims, and establishes a procedure to ensure that the administrative remedies are adequate and effective. The exhaustion requirement is expressly limited to 1983 actions brought by an adult convicted of a crime. 42 U.S. C. 1997e(a)(1) (1976 ed., Supp. IV).[10] Section 1997e(b)(1) instructs the Attorney General to "promulgate minimum standards for the development and implementation of a plain, speedy, and effective system" of administrative remedies, and 1997e(b)(2) specifies certain minimum standards that must be included.[11] A court may require exhaustion of administrative remedies only if "the Attorney General has certified or the court has determined that such administrative *511 remedies are in substantial compliance with the minimum acceptable standards promulgated under subsection (b)." 1997e(a)(2). Before exhaustion may be required, the court must further conclude that it "would be appropriate and in the interests of justice." 1997e(a)(1).[12] Finally, in those 1983 actions meeting all the statutory requirements for exhaustion, the district court may not dismiss the case, but may only "continue such case for a period of not to exceed ninety days in order to require exhaustion." This detailed scheme is inconsistent with discretion to impose, on an ad hoc basis, a judicially developed exhaustion rule in other cases. |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | hoc basis, a judicially developed exhaustion rule in other cases. Congress hoped that 1997e would improve prison conditions by stimulating the development of successful grievance mechanisms. See, e. g., Conf. Rep. 9; H. R. Rep. No. 96-80, p. 4 ; 1979 Hearings 4 ; 124 Cong. Rec. 11976 ; 125 Cong. Rec. 12492 ; 126 Cong. Rec. 10780 To further this purpose, Congress provided for the deferral of the exercise of federal jurisdiction over certain 1983 claims only on the condition that the state prisons develop adequate procedures. This purpose would be frustrated by judicial discretion to impose exhaustion generally: the would have no incentive to adopt grievance *512 procedures capable of certification, because prisoner 1983 cases could be diverted to state administrative remedies in any event. In sum, the exhaustion provisions of the Act make sense, and are not superfluous, only if exhaustion could not be required before its enactment and if Congress intended to carve out a narrow exception to this no-exhaustion The legislative history of 1997e demonstrates that Congress has taken the approach of carving out specific exceptions to the general rule that federal courts cannot require exhaustion under 1983. It is not our province to alter the balance struck by Congress in establishing the procedural framework for bringing actions under 1983. C Respondent and the Court of Appeals argue that exhaustion of administrative remedies should be required because it would further various policies. They argue that an exhaustion requirement would lessen the perceived burden that 1983 actions impose on federal courts;[13] would further the goal of comity and improve federal-state relations by postponing federal-court review until after the state administrative agency had passed on the issue;[14] and would enable the agency, which presumably has expertise in the area at issue, to enlighten the federal court's ultimate decision. *513 As we noted earlier, policy considerations alone cannot justify judicially imposed exhaustion unless exhaustion is consistent with congressional intent. See and n. 4. Furthermore, as the debates over incorporating the exhaustion requirement in 1997e demonstrate, the relevant policy considerations do not invariably point in one direction, and there is vehement disagreement over the validity of the assumptions underlying many of them.[15] The very difficulty of these policy considerations, and Congress' superior institutional competence to pursue this debate, suggest that legislative not judicial solutions are preferable. Cf. ; Beyond the policy issues that must be resolved in deciding whether to require exhaustion, there are equally difficult questions concerning the design and scope of an exhaustion requirement. These questions include how to define those categories of 1983 claims in which |
Justice Marshall | 1,982 | 15 | majority | Patsy v. Board of Regents of Fla. | https://www.courtlistener.com/opinion/110753/patsy-v-board-of-regents-of-fla/ | how to define those categories of 1983 claims in which exhaustion might be desirable; *514 how to unify and centralize the standards for judging the kinds of administrative procedures that should be exhausted;[16] what tolling requirements and time limitations should be adopted;[17] what is the res judicata and collateral estoppel effect of particular administrative determinations; what consequences should attach to the failure to comply with procedural requirements of administrative proceedings; and whether federal courts could grant necessary interim injunctive relief and hold the action pending exhaustion, or proceed to judgment without requiring exhaustion even though exhaustion might otherwise be required, where the relevant administrative agency is either powerless or not inclined to grant such interim relief. These and similar questions might be answered swiftly and surely by legislation, but would create costly, remedy-delaying, and court-burdening litigation if answered incrementally by the judiciary in the context of diverse constitutional claims relating to thousands of different state agencies.[] *515 The very variety of claims, claimants, and state agencies involved in 1983 cases argues for congressional consideration of the myriad of policy considerations, and may explain why Congress, in deciding whether to require exhaustion in certain 1983 actions brought by adult prisoners, carved out such a narrow, detailed exception to the no-exhaustion After full debate and consideration of the various policy arguments, Congress adopted 1997e, taking the largest class of 1983 actions and constructing an exhaustion requirement that differs substantially from the McKart-type standard urged by respondent and adopted by the Court of Appeals. See n. It is not for us to say whether Congress will or should create a similar scheme for other categories of 1983 claims or whether Congress will or should adopt an altogether different exhaustion requirement for nonprisoner 1983 claims.[19] *516 IV Based on the legislative histories of both 1983 and 1997e, we conclude that exhaustion of state administrative remedies should not be required as a prerequisite to bringing an action pursuant to 1983. We decline to overturn our prior decisions holding that such exhaustion is not required. The decision of the Court of Appeals is reversed, and the case is remanded for proceedings consistent with this opinion. It is so ordered. |
Justice Powell | 1,976 | 17 | concurring | Middendorf v. Henry | https://www.courtlistener.com/opinion/109414/middendorf-v-henry/ | As I agree with the substance and holding of the Court's opinion, I join it. I write separately to emphasize the factor which, in my view, distinguishes this case from One sentence expresses the fundamental basis for the distinction: "This Court has long recognized that the military is, by necessity, a specialized society separate from civilian society." In Parker, the court went on to say that we also have recognized that "the military has, again by necessity, developed laws and traditions of its own during its long history." Only last Term in we said: "The laws and traditions governing [military] discipline have a long history; they are founded on unique military exigencies as powerful now as in the past. Their contemporary vitality repeatedly has been recognized by Congress." The Constitution expressly authorized the Congress to "make Rules for the Government and Regulation of the land and naval Forces." Art. I, 8. Court-martial proceedings, as a primary means for the regulation and discipline of the Armed Forces, were well known to the Founding Fathers. The procedures in such courts were *50 never deemed analogous to, or required to conform with, procedures in civilian courts. One must ignore history, tradition, and practice for two centuries to read into the Constitution, at this late date, a requirement for counsel in the discipline of minor violations of military law.[1] I recognize, of course, that one's constitutional rights are not surrendered upon entering the Armed Services. But the rights are applied, as this Court often has held, in light of the "unique military exigencies" that necessarily govern many aspects of military service. See In recognition of this, since the founding of the Republic Congress has enacted special legislation applicable only to the Armed Services,[2] including the current provisions in the Uniform Code of *51 Military Justice for summary courts-martial. Art. 16 (3), UCMJ, 10 U.S. C. 816 (3). I find no basis for holding now that the Constitution compels the equating, for purposes of requiring that counsel be provided, of military summary courts with civilian criminal courts. MR. JUSTICE MARSHALL, with whom MR. |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | In 14th-century London the bakers' guild regulated the economics of the craft and the quality of its product. In the year 1, it was adjudged that one Richard de Lughteburghe "should have the punishment of the hurdle" because he sold certain loaves of bread in London; the bread had been baked in Suthwerke, rather than London, and the loaves were not of "the proper weight."[1] Thus Richard had violated *583 a guild restriction designed to protect the economic interests of the local bakers[2] as well as a restriction designed to protect the public from the purchase of inferior products. For centuries the common law of restraint of trade has been concerned with restrictions on entry into particular professions and occupations. As the case of the Suthwerke baker illustrates, the restrictions imposed by medieval English guilds served two important but quite different purposes. The guilds limited the number of persons who might engage in a particular craft in order to be sure that there was enough work available to enable guild members to earn an adequate livelihood.[3] They also protected the public by ensuring that apprentices, journeymen, and master craftsmen would have the skills that were required for their work. In numerous occupations today, licensing requirements[4] may serve *584 either or both of the broad purposes of the medieval guild restrictions. The risk that private regulation of market entry, prices, or output may be designed to confer monopoly profits on members of an industry at the expense of the consuming public has been the central concern of both the development of the common law of restraint of trade and our antitrust jurisprudence. At the same time, the risk that the free market may not adequately protect the public from purveyors of inferior goods and services has provided a legitimate justification for the public regulation of entry into a wide variety of occupations. Private regulation is generally proscribed by the antitrust laws; public regulation is generally consistent with antitrust policy. A potential conflict arises, however, whenever government delegates licensing power to private parties whose economic interests may be served by limiting the number of competitors who may engage in a particular trade. In fact private parties have used licensing to advance their own interests in restraining competition at the expense of the public interest. See generally Gellhorn, The Abuse of Occupational Licensing, The potential conflict with the antitrust laws may be avoided in either of two ways. The State may itself formulate the governing standards and administer the procedures *585 that determine whether or not particular applicants are qualified. When the State |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | whether or not particular applicants are qualified. When the State itself governs entry into a profession, the evils associated with giving power over a market to those who stand to benefit from inhibiting entry into that market are absent. For that reason, state action of that kind, even if it is specifically designed to control output and to regulate prices, does not violate the antitrust laws. Alternatively, the State may delegate to private parties the authority to formulate the standards and to determine the qualifications of particular applicants. When that authority is delegated to those with a stake in the competitive conditions within the market, there is a risk that public power will be exercised for private benefit. To minimize that risk, state policies displacing competition must be "clearly and affirmatively expressed" and must be appropriately supervised. See Community Communications ; California Retail Liquor Dealers In this case respondent has been unable to obtain a license to practice law in Arizona. He alleges that this is not because of any doubts about his competence as a lawyer, but because petitioners have engaged in an anticompetitive conspiracy in which they have used the Arizona bar examination to artificially limit the number of persons permitted to practice law in that State. Petitioners claim that the alleged conspiracy is not actionable under 1 of the Act, 15 U.S. C. 1, because it represents the decision of the State. But petitioners do not identify any state body that has decided that it is in the public interest to limit entry of even fully qualified persons into the Arizona Bar. Indeed, the conspiracy that is alleged is not the product of any regulatory scheme at all; there is no evidence that any criterion except competence has been adopted by Arizona as the basis for granting licenses to practice law. The conspiracy respondent has alleged is private; market participants are allegedly *586 attempting to protect their competitive position through a misuse of their powers. Yet the Court holds that this conspiracy is cloaked in the State's from the antitrust laws. In my judgment, the competitive ideal of the Act may not be so easily escaped. I Petitioners are members of the Arizona Supreme Court's Committee on Examinations and Admissions. The Arizona Supreme Court established the Committee to recommend applicants for admission to the Arizona Bar; it consists of seven members of the State Bar selected from a list of nominees supplied by the Arizona State Bar Association's Board of Governors.[5] Petitioners administered the 1974 bar examination which respondent took and failed. In his complaint, respondent alleged |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | which respondent took and failed. In his complaint, respondent alleged that after the scores of each candidate were known, petitioners selected a particular score which would equal the passing grade. The complaint alleges that the petitioners would adjust the grading formula in order to limit the number of persons who could enter the market and compete with members of the Arizona Bar. In this manner, respondent was "artificially prevented from entering into competition as an attorney in the State of Arizona."[6] The Arizona Supreme Court has instructed petitioners to recommend for admission to the Bar "[a]ll applicants who receive a passing grade in the general examination and who are found to be otherwise qualified"[7] There is no indication that any criterion other than competence is appropriate under the Supreme Court's Rules for regulating admission to the Bar.[8] Indeed with respect to respondent's application *587 for admission, the Arizona Supreme Court wrote: "The practice of law is not a privilege but a right, conditioned solely upon the requirement that a person have the necessary mental, physical and moral qualifications." Application of Ronwin, cert. denied, In short, one looks in vain in Arizona law, petitioners' briefs, or the pronouncements of the Arizona Supreme Court for an articulation of any policy beside that of admitting only competent attorneys to practice in Arizona. Thus, respondent does not challenge any state policy. He contests neither the decision to license those who wish to practice law, nor the decision to require a certain level of competence, as measured in a bar examination, as a precondition to licensing. Instead, he challenges an alleged decision to exclude even competent attorneys from practice in Arizona in order to protect the interests of the Arizona Bar. As we have often reiterated in cases that involve the sufficiency of a pleading, a federal court may not dismiss a complaint for failure to state a claim unless it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitle him to relief.[9] The allegations of the complaint must be taken as true for purposes of a decision on the pleadings.[10] A judge reading a complaint of this kind is understandably somewhat skeptical. It seems highly improbable that members of the profession entrusted by the State Supreme Court *588 with a public obligation to administer an examination system that will measure applicants' competence would betray that trust, and secretly subvert that system to serve their private ends. Nevertheless, the probability that respondent will not prevail at trial is no justification for dismissing |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | will not prevail at trial is no justification for dismissing the complaint. "Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." The Court does not purport to justify dismissal of this complaint by reference to the low probability that respondent will prevail at trial. Instead, it substantially broadens the doctrine of antitrust using an elephant gun to kill a flea. II If respondent were challenging a restraint of trade imposed by the sovereign itself, this case would be governed by which held that the Act does not apply to the sovereign acts of States. See As the Court points out, the Arizona Supreme Court exercises sovereign power with respect to admission to the Arizona Bar; hence if the challenged conduct were that of the court, it would be immune under Parker. Ante, at 567-569.[11] The majority's conclusion that the challenged action was that of the Arizona Supreme Court is, however, plainly wrong. Respondent alleged that the decision to place an artificial limit on the number of lawyers was made by petitioners not by the State Supreme Court. There is no contention that petitioners made that decision at the direction or behest of the Supreme Court. That court is not a petitioner, nor was it named as a defendant in respondent's complaint. Nor, unlike the Court, have petitioners suggested that the Arizona Supreme Court played any part in establishing the grading standards for the bar examination *589 or made any independent decision to admit or reject any individual applicant for admission to the Bar.[12] Because respondent is not challenging the conduct of the Arizona Supreme Court, Parker is simply inapplicable. Any possible claim that the challenged conduct is that of the State Supreme Court is squarely foreclosed by There an antitrust action was brought challenging minimum-fee schedules published by a county bar association and enforced by the State Bar pursuant to its mandate from the Virginia Supreme Court to regulate the practice of law in that State. After acknowledging that the State Bar was a state agency which had enforced the schedules pursuant to the authority granted it by the State Supreme Court, we stated a simple test for antitrust : "The threshold inquiry in determining if an anticompetitive activity is state action of the type the Act was not meant to proscribe is whether the activity is required by the State acting as sovereign. Here we need not inquire further into the state-action question because it cannot fairly be said that the State of |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | because it cannot fairly be said that the State of Virginia through its Supreme Court Rules required the anticompetitive activities of either respondent. Respondents have pointed to no Virginia statute requiring their activities; state law simply does not refer to fees, leaving regulation of the profession to the Virginia Supreme Court; although the Supreme Court's ethical codes mention advisory fee schedules they do not direct either respondent *590 to supply them, or require the type of price floor which arose from respondents' activities." (citations omitted). In the Court applied the test to a disciplinary rule restricting advertising by Arizona attorneys that the Supreme Court itself "has imposed and enforces," : "In the instant case the challenged restraint is the affirmative command of the Arizona Supreme Court under its Rules 27(a) and 29(a) and its Disciplinary Rule 2-101(B). That court is the ultimate body wielding the State's power over the practice of law, see Ariz. Const., Art. 3; In re Bailey, and, thus, the restraint is `compelled by direction of the State acting as a sovereign.'" The test stated in and Bates is that the sovereign must require the restraint. Indeed, that test is derived from Parker itself: "We find nothing in the language of the Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature [or supreme court]." -351 Here, the sovereign is the State Supreme Court, not petitioners, and the court did not require petitioners to grade the bar examination as they did.[13] The fact that petitioners are part of a state agency under the direction of the sovereign is insufficient to cloak them in the sovereign's ; that much was also decided in : *591 "The fact that the State Bar is a state agency for some limited purposes does not create an antitrust shield that allows it to foster anticompetitive practices for the benefit of its members. The State Bar, by providing that deviation from County Bar minimum fees may lead to disciplinary action, has voluntarily joined in what is essentially a private anticompetitive activity, and in that posture cannot claim it is beyond the reach of the Act." -792 " therefore made it clear that, for purposes of the Parker doctrine, not every act of a state agency is that of the State as sovereign." Rather, "anticompetitive actions of a state instrumentality not compelled by the State acting as sovereign are not immune from the antitrust laws." See also ; An antitrust attack falls under Parker only when it challenges |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | An antitrust attack falls under Parker only when it challenges a decision of the sovereign and not the decision of the state bar which indisputably is not the sovereign. See California Retail Liquor Dealers[14] Here no decision of the sovereign, the Arizona Supreme Court, is attacked;[15] only a *592 conspiracy of petitioners which was neither compelled nor directed by the sovereign is at stake. Since there is no claim that the court directed petitioners to artificially reduce the number of lawyers in Arizona, petitioners cannot utilize the sovereign's antitrust[16] The majority's confused analysis is illustrated by its difficulty in identifying the sovereign conduct which it thinks is at issue here. To support its conclusion that the challenged action is that of the Arizona Supreme Court, the majority suggests that what respondent challenges is the court's decision to deny respondent's application for admission to the Bar. Ante, at 577-578, n. 30. I find nothing in the record to indicate that the court ever made such a decision. Respondent's complaint alleges only that petitioners "announced the results" of the bar examination. App. 9. In their answer, petitioners admitted this and added nothing else of significance. The Rules of the Supreme Court do not call for the court to deny the application of a person who has failed the bar examination; rather they state only that any "applicant aggrieved by any decision of the Committee may within 20 days after such occurrence file a verified petition *593 with this Court for a review." Ariz. Sup. Ct. Rule 28(c) XII. Yet the Court disavows reliance on the Supreme Court's denial of Ronwin's petition, ante, at 577-578, n. 30,[17] and with good reason, see n. 15, supra.[18] Thus, if the Supreme Court did not itself deny Ronwin's application, if its denial of Ronwin's petition for review is irrelevant, and if the only criterion it ever required petitioners to employ was competence, it is difficult to see why petitioners should have from the requirements of federal law if, as alleged, they took the initiative in employing a criterion other than competence. "It is not enough that anticompetitive conduct is `prompted' by state action; rather, anticompetitive activities must be compelled by direction of the State acting as a sovereign." III It is, of course, true that the Arizona Supreme Court delegated to petitioners the task of administering the bar exam, and retained the authority to review or revise any action taken by petitioners. However, neither of these factors *594 is sufficient to accord petitioners under the Act. In Bates, the Court held that the State Bar's restrictions |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | In Bates, the Court held that the State Bar's restrictions on attorney advertising qualified for antitrust -362, because "the state policy requiring the anticompetitive restraint as part of a comprehensive regulatory system, was one clearly articulated and affirmatively expressed as state policy, and that the State's policy was actively supervised by the State Supreme Court as the policy-maker." 435 U. S., at This Court has since "adopted the principle, expressed in the plurality opinion in that anticompetitive restraints engaged in by state municipalities or subdivisions must be `clearly articulated and affirmatively expressed as state policy' in order to gain an antitrust exemption." Community Communications n. 14 (quoting ).[19] Here there is nothing approaching a clearly articulated and affirmatively expressed state policy favoring an artificial limit on the number of lawyers licensed to practice in Arizona. Indeed, the majority does not attempt to argue that petitioners satisfy this test. The only articulated policy to be found in Arizona law is that competent lawyers should be admitted to practice; indeed this is the only policy petitioners articulate in this Court. An agreement of the type alleged in respondent's complaint is entirely unrelated to any "clearly articulated and affirmatively expressed" policy of Arizona. While the Arizona Supreme Court may have permitted petitioners to grade and score respondent's bar examination as they did, Parker itself indicates that "a state does not give to those who violate the Act by authorizing them to violate it, or by declaring that their action is lawful." The Arizona Supreme Court *595 may permit the challenged restraint, but it has hardly required it as a consequence of some affirmatively expressed and clearly articulated policy. What we said of a state homerule provision that permitted but did not require municipalities to adopt a challenged restraint on competition applies fully here: "[P]lainly the requirement of `clear articulation and affirmative expression' is not satisfied when the State's position is one of mere neutrality respecting the municipal actions challenged as anticompetitive. A State that allows its municipalities to do as they please can hardly be said to have `contemplated' the specific anticompetitive actions for which municipal liability is sought. Acceptance of such a proposition that the general grant of power to enact ordinances necessarily implies state authorization to enact specific anticompetitive ordinances would wholly eviscerate the concepts of `clear articulation and affirmative expression' that our precedents require." -56 Unless the Arizona Supreme Court affirmatively directed petitioners to restrain competition by limiting the number of otherwise qualified lawyers admitted to practice in Arizona, it simply cannot be said that its position is |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | Arizona, it simply cannot be said that its position is anything more than one of neutrality; mere authorization for anticompetitive conduct is wholly insufficient to satisfy the test for antitrust See -106; -415[20] No *596 affirmative decision of the Arizona Supreme Court to restrain competition by limiting the number of qualified persons admitted to the Bar is disclosed on the present record. The alleged conspiracy to introduce a factor other than competence into the bar examination process is not the product of a clearly articulated and affirmatively expressed state policy and hence does not qualify for antitrust[21] IV The conclusion that enough has been alleged in the complaint to survive a motion to dismiss does not warrant the further conclusion that the respondent is likely to prevail at *597 trial, or even that his case is likely to survive a motion for summary judgment. For it is perfectly clear that the admissions policy that is described in the Arizona Supreme Court's Rules does not offend the Act. Any examination procedure will place a significant barrier to entry into the profession; moreover, a significant measure of discretion must be employed in the administration of testing procedures. Yet ensuring that only the competent are licensed to serve the public is entirely consistent with the Act. See -793.[22] The Court is concerned about the danger that because thousands of aspirants fail to pass bar examinations every year, "affirmance of the Court of Appeals in this case could well invite numerous suits" questioning bar examiners' motives; the Court fears that the burdens of discovery and trial and "the threat of treble damages" will deter " `able citizens' from performing this essential public service." Ante, at 580-581, n. 34. The Court is, I submit, unduly alarmed.[23] A *598 denial of antitrust in this case would not necessarily pose any realistic threat of liability, or even of prolonged litigation. Respondent must first produce sufficient evidence that petitioners have indeed abused their public trust to survive summary judgment, a task that no doubt will prove formidable.[24] Moreover, petitioners' motives will not necessarily be relevant to respondent's case. If the proof demonstrates that petitioners have adopted a reasonable means for regulating admission to the Arizona Bar on the basis of competence, respondent will be unable to show the requisite adverse effect on competition even if the subjective motivation of one or more bar examiners was tainted by sinister self-interest. Indeed, even if respondent can show that he was "arbitrarily" denied admission to the Bar for reasons unrelated to his qualifications, unless he can also show that this occurred |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | his qualifications, unless he can also show that this occurred as part of an anticompetitive scheme, his antitrust claim will fail. In any event, there is true irony in the Court's reliance on these concerns. In essence, the Court is suggesting that a special protective shield should be provided to lawyers because they unlike bakers, engineers, or the members of any other craft may not have sufficient confidence in the ability of our legal system to identify and reject unmeritorious claims to be willing to assume the ordinary risks of litigation associated with the performance of civic responsibilities. I do not share the Court's fear that the administration of bar *599 examinations by court-appointed lawyers cannot survive the scrutiny associated with rather ordinary litigation that persons in most other walks of life are expected to endure. The Court also no doubt believes that lawyers or at least those leaders of the bar who are asked to serve as bar examiners will always be faithful to their fiduciary responsibilities. Though I would agree that the presumption is indeed a strong one, nothing in the sweeping language of the Act justifies carving out rules for lawyers inapplicable to any other profession. In we specifically rejected such parochialism. Indeed, the argument that it is unwise or unnecessary to require the petitioners to comply with the Act "is simply an attack upon the wisdom of the longstanding congressional commitment to the policy of free markets and open competition embodied in the antitrust laws." We should not ignore that commitment today. Denial of antitrust in this case would hardly leave the State helpless to cope with felt exigencies; should it wish to do so, the Arizona Supreme Court remains free to give petitioners an affirmative direction to engage in the precise conduct that respondent has alleged. The antitrust laws hardly create any inescapable burdens for the State; they simply require that decisions to displace the free market be made overtly by public officials subject to public accountability, rather than secretly in the course of a conspiracy involving representatives of a private guild accountable to the public indirectly if at all. See ; -417 "The national policy in favor of competition cannot be thwarted by casting such a gauzy cloak of state involvement over what is essentially a private price-fixing arrangement." The practical concerns identified by the Court pale when compared with the principle that should govern the decision *600 of this case. The rule of law that applies to this case is applicable to countless areas of the economy in which |
Justice Stevens | 1,984 | 16 | dissenting | Hoover v. Ronwin | https://www.courtlistener.com/opinion/111167/hoover-v-ronwin/ | is applicable to countless areas of the economy in which arbitrary restraints on entry may impose the very costs on the consuming public which the antitrust laws were designed to avoid.[25] Experience in the administration of the Act has demonstrated that there is a real risk that private associations that purport merely to regulate professional standards may in fact use their powers to restrain competition which threatens their members.[26] It is little short of irresponsible to tear a gaping hole in the fabric of antitrust law simply because we may be confident that respondent will be unable to prove what he alleges. *601 Frivolous cases should be treated as exactly that, and not as occasions for fundamental shifts in legal doctrine.[27] Our legal system has developed procedures for speedily disposing of unfounded claims; if they are inadequate to protect petitioners from vexatious litigation, then there is something wrong with those procedures, not with the law of antitrust That body of law simply does not permit the Act to be displaced when neither the state legislature nor the state supreme court has expressed any desire to preclude application of the antitrust laws to the conduct of those who stand to benefit from restraints of trade. A healthy respect for state regulatory policy does not require immunizing those who abuse their public trust; such a thin veneer of state involvement is insufficient justification for casting aside the competitive ideal of the Act. The commitment to free markets and open competition that has evolved over the centuries and is embodied in the Act should be sturdy enough to withstand petitioners' flimsy claim. That claim might have merited the support of the 14th-century guilds; today it should be accorded the "punishment of the hurdle." I respectfully dissent. |
Justice White | 1,990 | 6 | dissenting | Kaiser Aluminum & Chemical Corp. v. Bonjorno | https://www.courtlistener.com/opinion/112403/kaiser-aluminum-chemical-corp-v-bonjorno/ | The Court today holds that the amended version of the federal postjudgment interest statute, 28 U.S. C. 1961 (1982 ed.), does not apply to a judgment entered before the effective date of the amendment, even though the litigation was still pending when the amendment took effect and the District *859 Court calculated the amount of postjudgment interest long after the effective date. Because I cannot concur in the Court's decision denying effect to an important ameliorative federal statute in precisely the kind of situation demonstrating the need for the amendment, I respectfully dissent. I I begin where the majority does, with the language of 1961. In concluding that the plain language of the statute decides this case, the majority stresses that both versions of 1961 provide that the interest due "shall be calculated from the date of the entry of the judgment." Ante, at 838 (emphasis omitted). But this clause only fixes the starting point from which interest is to be allowed; it indicates that 1961 is in fact a postjudgment interest statute, not a prejudgment interest statute (or a postverdict interest statute, see ante, at 835). This clause does not direct the rate to be applied to money judgments. That matter is governed by the following clause of 1961, requiring that interest be calculated at the Treasury bill rate settled immediately prior to the date of the judgment. The majority's error results from a subtle but significant misreading of 1961. The statute, as just noted, states that interest shall be calculated "from" the entry of the judgment. But the majority reads 1961 as if it says that interest shall be calculated "at the date of the entry of the judgment" or "as if at the date of the entry of judgment." The majority essentially interprets 1961 as commanding the district courts to transport themselves back in time to the judgment date to determine the rate of postjudgment interest, not because 1961 directs the district courts to do so in ascertaining the Treasury bill rate (which it plainly does), but because 1961 supposedly requires the district courts to apply the postjudgment interest law in effect at the judgment date. *860 This is too convoluted a reading of 1961.[1] The Court reaches it because of its premise that "on the date of judgment expectations with respect to interest liability were fixed, so that the parties could make informed decisions about the cost and potential benefits of paying the judgment or seeking appeal." Ante, at 839. The Court fears it would be unfair to apply new 1961 to a defendant that had |
Justice White | 1,990 | 6 | dissenting | Kaiser Aluminum & Chemical Corp. v. Bonjorno | https://www.courtlistener.com/opinion/112403/kaiser-aluminum-chemical-corp-v-bonjorno/ | unfair to apply new 1961 to a defendant that had already begun the process of challenging a money judgment because an important element defining the risk of appeal, the rate of postjudgment interest, changed upon the amendment of 1961. But putting aside for the moment whether expectations about interest liability can ever settle before the end of litigation, I still do not understand why we should not apply new 1961 to litigation in progress when we know that the principal reason for Congress' amendment of 1961 was to change the risk of postjudgment litigation. The decision to appeal is not irrevocable. When new 1961 took effect, Kaiser's motion for judgment notwithstanding the verdict was outstanding, and it was certainly within Kaiser's power then to offer a settlement based on its new perception of the risk in further proceedings. Kaiser also must have understood *861 that Bonjorno would have contemplated an appeal if the District Court overturned or reduced the jury verdict. Nor was Kaiser unable to calculate the risk of protracting litigation under new 1961 when it decided to seek certiorari. Though the majority never uses the dreaded word, it clearly wants to say that Kaiser's right to a particular rate of postjudgment interest "vested" at the date of entry of judgment. Only the concept of "vestedness" fully explains the link that the majority makes between Kaiser's "fixed" expectations and its ability to make "informed" decisions. Ante, at 839. The majority overlooks the crucial point that Kaiser's liability for postjudgment interest could not be settled until the judgment against Kaiser became final. Until the end of litigation, a defendant must always evaluate the possibility that a judgment against it, and concomitantly the postjudgment interest that it must pay, may be vacated, decreased, or increased on appeal, in postjudgment proceedings before the District Court, or by a legislated change in the substantive law. (In this case, Kaiser's disastrous experience with its first attempt to overturn the jury verdict certainly made it aware of this possibility.) So whereas application of new 1961 might have interfered with Kaiser's vested rights had Kaiser already paid the judgment and interest calculated under the old version of the statute, its expectations were not nearly so fixed before the case came to an end.[2] *862 Nor do I agree that the statutory language providing for a delayed effective date means that "the amended version [of 1961] cannot be applied before the effective date." Ante, at 839. Amended 1961 was but one small part of the Federal Courts Improvement Act of 1982 (FCIA), Stat. 25, an omnibus law |
Justice White | 1,990 | 6 | dissenting | Kaiser Aluminum & Chemical Corp. v. Bonjorno | https://www.courtlistener.com/opinion/112403/kaiser-aluminum-chemical-corp-v-bonjorno/ | Improvement Act of 1982 (FCIA), Stat. 25, an omnibus law effecting significant changes in the administration of the federal courts, including the abolition of the old Court of Claims and Court of Customs and Patent Appeals and the creation of the new United States Claims Court and the United States Court of Appeals for the Federal Circuit.[3] Congress had to establish some date to mark the end of business for the old courts and the beginning for the new courts, and that date could not be the date of enactment of the statute, given the need to provide for court personnel and facilities. See, e. g., Pub. L. 97-164, 121, -35 (authorizing United States Claims Court to appoint clerk, law clerks, secretaries, bailiffs, and messengers.).[4] *863 Moreover, Congress is able to recognize a distinction that has eluded the majority: the difference between a statute taking effect on a certain date, in the sense that its provisions are not to be applied by a court before that date passes, and a statute having effect only after that date, in that its provisions may not be applied even to cases pending at that time. Indeed, Congress appears to have understood that the courts would presume that the provisions of FCIA would be applied to pending cases absent legislative direction to the contrary, because it specifically provided that the jurisdictional changes in FCIA should not be applied to certain classes of pending cases. In particular, 403(e) of FCIA, provided that pending cases on appeal from the district courts to the courts of appeals should remain in the courts of appeals to which the appeals had originally been taken rather than be transferred to the Federal Circuit, as would have been otherwise required by the jurisdictional changes in FCIA. See, e. g., In other statutes, Congress has recognized that there might be a problem in applying new law to pending cases and has provided for those cases expressly. When Congress eliminated most of this Court's appellate jurisdiction in 1988, it delayed the effective date of the jurisdictional changes, but it also provided specifically that those changes should not "affect the right to review or the manner of reviewing the judgment or decree of a court which was entered before such effective date." Pub. L. 100-352, 7, And when Congress recently increased the jurisdictional amount for diversity cases, it specifically provided that "[t]he amendments. shall apply to any civil action commenced on or after the 180th day after the date of enactment of this title." Pub. L. 100-702, 201(b), *864 Congress thus understands that the |
Justice White | 1,990 | 6 | dissenting | Kaiser Aluminum & Chemical Corp. v. Bonjorno | https://www.courtlistener.com/opinion/112403/kaiser-aluminum-chemical-corp-v-bonjorno/ | Pub. L. 100-702, 201(b), *864 Congress thus understands that the mere inclusion of a delayed effective date will not necessarily be understood by the courts as precluding the application of the new statute to pending cases; when circumstances have so required, it has gone further and told the courts not to apply the statutory changes. This is not surprising, because as I discuss infra, at 868, absent legislative direction to the contrary or constitutional objections, federal courts have generally applied statutes to cases pending at their effective date, particularly if the statutes govern the administration of the courts. I do not suggest that a delayed effective date should never indicate that a statute is not to be applied to pending cases. I cannot agree, however, that a delayed effective date in a statute as complex as FCIA, which effected many changes in judicial administration requiring a transition period and having nothing to do with postjudgment interest, is particularly instructive about the temporal operation of new 1961. II Because the plain language of FCIA does not state whether amended 1961 is to be applied to cases pending on the statute's effective date, it is necessary to apply the rules of construction that the Court has followed for almost two centuries in determining the temporal operation of federal statutes. The Court discerns an "apparent tension" between the rule of and United requiring application of intervening statutory changes to pending cases, and the rule of against retroactive application of statutes. Ante, at 837. The tension is more apparent than real, for the rule against retroactivity has little to do with this case. This case does not involve true retroaction, in the sense of the application of a change in law to overturn a judicial adjudication of rights that has already become final. *865 Cf. Chicot County Drainage Nor would application of amended 1961 in this case require the courts to disturb a legal relation to which the parties have committed themselves, or that they have otherwise reached, in reliance on the state of the law prior to the amendment. Thus this case is unlike Claridge Apartments There the Commissioner of Internal Revenue unsuccessfully argued for retroactive application of the 1938 Chandler Act, a bankruptcy statute that required the reduction of the basis of property transferred in the acquisition of an insolvent corporation to the fair market value of the property at the date of confirmation of a reorganization plan. At the time of the acquisition of the property involved in Claridge Apartments, the tax laws provided that the basis to the transferee would |
Justice White | 1,990 | 6 | dissenting | Kaiser Aluminum & Chemical Corp. v. Bonjorno | https://www.courtlistener.com/opinion/112403/kaiser-aluminum-chemical-corp-v-bonjorno/ | tax laws provided that the basis to the transferee would be the same as the (higher) adjusted basis in the hands of the transferor corporation. Further, reorganization proceedings involving the transferor had closed before the Chandler Act became effective. In concluding that Congress intended the Chandler Act to apply only to reorganization proceedings pending on its effective date, the Court stressed that the Commissioner's construction would make the Chandler Act actually retroactive, in that it would require recalculation of definitely settled tax liabilities for past years. "Congress was not uprooting the whole tax past of reorganized debtors and their creditors."[5] No such uprooting is possible here; when amended 1961 took effect, the parties were still contesting their obligations to *866 each other. Application of amended 1961 here does not require "altering the past legal consequences of past actions." What is even more important for present purposes is that in Claridge Apartments the Court also rejected the Tax Court's view that the Chandler Act did not apply to all tax years at issue in any reorganization proceedings pending at the statute's enactment, but only to 1938 and later tax years. Remarking that "the whole problem was to give the Chandler Act as wide room as possible for future operation, notwithstanding the previous vesting of substantive rights or institution of bankruptcy or reorganization proceedings," -158, the Court had little difficulty in concluding that the changes in the tax laws applied even to reorganization "plans already confirmed in pending proceedings." The Court ordered application of the Chandler Act even to past tax years as long as the past tax liability was relevant to the ongoing reorganization of a debtor corporation. The Court then stated the relevant rule of construction that should be applied today: "It is the normal and usual function of legislation to discriminate between closed transactions and future ones or others pending but not completed." Not only is it the normal and usual function of legislation to so discriminate; it is our obligation to do so as well, to give congressional policy as declared in federal statutes the widest application consistent with constitutional guarantees. The evolution of the presumption in favor of application of new laws to pending cases was comprehensively reviewed in It is a rule that we have applied with consistency. By this I do not mean that we have applied it mechanically. As with all choice-of-law rules, the rule requires evaluation of the implicated interests. Thus we cautioned in that neither that decision nor prior ones purported "to hold that courts must always thus apply new laws to |
Justice White | 1,990 | 6 | dissenting | Kaiser Aluminum & Chemical Corp. v. Bonjorno | https://www.courtlistener.com/opinion/112403/kaiser-aluminum-chemical-corp-v-bonjorno/ | hold that courts must always thus apply new laws to pending cases in the absence of clear legislative *867 direction to the contrary," and we discussed at length the conditions that might counsel against application of a new statute to a pending case. But this is not a difficult case if the teachings of are observed. noted that the concerns expressed in prior cases "relative to the possible working of an injustice [by applying a new statute] center upon (a) the nature and identity of the parties, (b) the nature of their rights, and (c) the nature of the impact of the change in law upon those rights." As for the nature and identity of the parties here, it is true that this lawsuit is between private parties. But as makes clear, our analysis must be more discerning than just distinguishing between private and public entities; we must also look to the public interests implicated by the statutory change as well as the lawsuit itself.[6] Congress enacted amended 1961 as part of a comprehensive reform of the federal courts and designed new 1961 itself as an essential counterweight to the normal incentives *868 for delay in litigation. Our readiness to apply new statutes to pending cases has arguably been at its peak when the statutes involved the administration or jurisdiction of the federal courts. See ; United ; Dickinson Industrial Site, As for the nature of the rights, it is here that my disagreement with the majority is the sharpest. Much significance is ascribed to Kaiser's purportedly fixed expectations about the rate of postjudgment interest, see ante, at 839-840, but these expectations deserve little credit, for Kaiser was not entitled to assume much of anything about its interest rate. Postjudgment interest "rests solely upon statutory provision,"[7] and both parties were on notice that Congress could alter the applicable interest rate if it wished. Furthermore, unlike the right to wages for services rendered, the right to postjudgment interest does not "vest" in discrete amounts as each day passes. The amount of postjudgment interest that a party will recover (or be required to pay) can never be known with certainty until the amount of the underlying judgment is known with certainty, and that amount in turn cannot be definitively ascertained until the process of appeal is completed. Indeed, Bonjorno's right to postjudgment interest would have evaporated had the Court of Appeals reversed its judgment against Kaiser. Thus one cannot speak meaningfully of a "matured" right to postjudgment interest before the amount of the judgment is finally established.[8] *869 last requires us to |
Justice White | 1,990 | 6 | dissenting | Kaiser Aluminum & Chemical Corp. v. Bonjorno | https://www.courtlistener.com/opinion/112403/kaiser-aluminum-chemical-corp-v-bonjorno/ | the judgment is finally established.[8] *869 last requires us to consider "the nature of the impact of the change in law upon existing rights, or, to state it another way, the possibility that new and unanticipated obligations may be imposed upon a party without notice or opportunity to be heard." There is no claim here that Kaiser was unaware that its obligation for postjudgment interest could be altered during the pendency of litigation. Cf. Brinkerhoff-Faris Trust & Savings And Kaiser could have protected itself from fluctuation of the postjudgment interest rate by depositing the amount of the judgment with the District Court. See Fed. Rule Civ. Proc. 67. Nor did the amendment of 1961 create a new substantive cause of action or eliminate a substantive defense in a way that would cause hardship to Kaiser. Cf. Union Pacific R. Finally, a more general word must be said about the element of "manifest injustice" that addressed. It is difficult to see how manifest injustice could be worked except by refusing to apply amended 1961 to this case. As a result of the Court's decision today, Bonjorno is remitted to a postjudgment interest rate greatly lower than its cost of money during the pendency of the litigation, while Kaiser, an adjudicated violator of the antitrust laws, is permitted to escape the consequences of protracting litigation. This was precisely the result that Congress intended to prevent by amending 1961. *870 III I agree with the majority that the plain language of 1961 compels us to conclude that postjudgment interest runs from the date of the entry of judgment, not the date of a jury verdict. Ante, at 835. I also agree with the majority that postjudgment interest in this case did not begin to accrue upon entry of the August 22, 1979, judgment. Because the District Court's subsequent grant of a new trial was never overturned, we must accept the District Court's determination that the August 22, 1979, judgment on damages was not supported by the evidence, and that damages were not ascertained until the December 2, 1981, verdict. The Court's holding is necessarily limited to the facts of this case. The majority does not state whether August 22, 1979, would have been the proper commencement date for accrual of postjudgment interest had Bonjorno successfully appealed the order granting a new trial.[9] Cf. Nor does the Court state any rule applicable to various other fact patterns not before us but commonly encountered by the lower courts, e. g., where the district court correctly ascertains total damages but improperly apportions them among the parties, |
Justice Powell | 1,973 | 17 | concurring | White v. Weiser | https://www.courtlistener.com/opinion/108828/white-v-weiser/ | Had I been a member of the Court when and were decided, I would not have thought that the Constitutiona vital and living charter after nearly two centuries because of the wise flexibility of its key provisionscould be read to require a rule of mathematical exactitude in legislative reapportionment. Moreover, the dissenting opinions of Justices Harlan[*] and WHITE and the concurring opinion of Justice Fortas in those cases demonstrated well that the exactitude required by the majority displayed a serious misunderstanding of the practicalities of the legislative and reapportioning processes. Nothing has occurred since Kirkpatrick and Wells to reflect adversely on the soundness, as I view it, of the dissenting perceptions. Indeed, the Court's recent opinions in Gaffney v. Cummings, ante, p. 735, and White v. Regester, ante, p. 755, strengthen the case against attempting to hold any reapportionment schemestate or congressionalto slide-rule precision. These more recent cases have allowed modest variations from theoretical "exactitude" in recognition of the impracticality of applying the Kirkpatrick rule as well as in deference to legitimate state interests. However all of this may be, Kirkpatrick is virtually indistinguishable from this case, and unless and until the Court decides to reconsider that decision, I will follow it. Accordingly, I join the Court's opinion. MR. JUSTICE MARSHALL, concurring in part. While I join Part I of the Court's opinion, I can agree with Part II wherein the Court reverses the District *799 Court's selection of Plan C over Plan B only insofar as that determination rests upon the fact that Plan B comes closer than Plan C to achieving the goal of "precise mathematical equality," see See also Whatever the merits of the view that a legislature's reapportionment plan will not be struck down merely because "district boundaries may have been drawn in a way that minimizes the number of contests between present incumbents," it is entirely another matter to suggest that a federal district court which has determined that a particular reapportionment plan fails to comport with the constitutional requirement of "one man, one vote" must, in drafting and adopting its own remedial plan, give consideration to the apparent desires of the controlling state political powers. In my opinion, the judicial remedial process in the reapportionment area as in any areashould be a fastidiously neutral and objective one, free of all political considerations and guided only by the controlling constitutional principle of strict accuracy in representative apportionment. Here the District Court gave ample recognition to the legislature's "primary responsibility"[*] in the area of apportionment when it added that its redistricting order was "without prejudice to |
Justice Blackmun | 1,983 | 11 | second_dissenting | Rushen v. Spain | https://www.courtlistener.com/opinion/111051/rushen-v-spain/ | I would deny certiorari in this case because I am not at all persuaded that the United States Court of Appeals for the Ninth Circuit was wrong in affirming the District Court's decision to issue a writ of habeas corpus, or that the case presents an issue worthy of plenary review. I therefore dissent. As the discussion that this case has generated illustrates, it is not simply a situation where the federal habeas courts have disregarded the guidance provided by and Nor does it involve a question over which the lower courts are confused or that is likely to recur often. *151 The Court indicates that the Ninth Circuit "affirmed on the basis that an unrecorded ex parte communication between trial judge and juror can never be harmless error," and with that proposition the Court "emphatically disagree[s]". Ante, at 117. While that interpretation of the Court of Appeals' opinion is possible, it certainly is not compelled. The entire discussion by the Court of Appeals on this issue is as follows: "The state court made no contemporary record of the ex-parte communication between judge and juror or even of the fact that it took place. In this case the district court correctly concluded that the condition of the record made it impossible to apply intelligently the harmless error test. The court's explanation of its decision to grant the habeas writ referred to the inadequacy of the state's record and the need for extensive speculation in determining the extent of the error. See The harmless effect of conceded constitutional error cannot be established by speculation from a silent record." App. A to Pet. for Cert. 4-5. The District Court had devoted what now provides 54 pages in the appendix to the petition for certiorari to a consideration whether the constitutional error assumed by the state courts could be determined to be harmless beyond a reasonable doubt in a post-trial hearing. The Ninth Circuit at that time had a rule that for certain constitutional errors, an after-the-fact determination of harmless error was impossible. The District Court concluded that the error here required automatic reversal. It then examined the record of the hearing and found its decision that no after-the-fact determination of harmlessness was possible reinforced by the paucity of evidence as to whether the juror, in fact, had been able to vote impartially. As I read those opinions, they indicate something far short of a determination that an *152 unrecorded ex parte communication between a trial judge and a juror can never be harmless error. This Court has not yet held that a |
Justice Blackmun | 1,983 | 11 | second_dissenting | Rushen v. Spain | https://www.courtlistener.com/opinion/111051/rushen-v-spain/ | harmless error. This Court has not yet held that a federal habeas court is barred by principles of federalism from carrying out its statutory duty under 28 U.S. C. 54(d) to determine whether the state court's factual determination is fairly supported by the record. In the Court found a conclusive presumption of juror bias inappropriate because it was not impossible to determine in an after-the-fact hearing whether the juror had been biased. Nothing in the opinion in that case, however, foreclosed the possibility that a conclusive presumption of bias might be called for in special circumstances. The concurring opinion pointed out: "[I]n certain instances a hearing may be inadequate for uncovering a juror's biases, leaving serious question whether the trial court had subjected the defendant to manifestly unjust procedures resulting in a miscarriage of justice. While each case must turn on its own facts, there are some extreme situations that would justify a finding of implied bias. Some examples might include a revelation that the juror is an actual employee of the prosecuting agency, that the juror is a close relative of one of the participants in the trial or the criminal transaction, or that the juror was a witness or somehow involved in the criminal transaction. Whether or not the state proceedings result in a finding of `no bias,' the Sixth Amendment right to an impartial jury should not allow a verdict to stand under such circumstances." 455 U.S., at 2. It added, in a footnote: "In the exceptional situations that may require application of an `implied bias' doctrine, the lower federal courts need not be deterred by 28 U.S. C. 54(d), which provides that in a federal habeas proceeding `a *153 determination after a hearing on the merits of a factual issue shall be presumed to be correct.' " at 2, n. Each of these examples no doubt refers to a situation in which the juror's connection with a participant in the trial is undisclosed. Nevertheless, it is at least a close question whether this case, where the juror's friend was killed by the defendant's organization, should be included in the "extreme situations" list. In addition, as JUSTICE MARSHALL points out, a conclusive presumption of bias in this case is further supported by the fact that the State had the burden of proving beyond a reasonable doubt that the defendant had suffered no injury from the admitted constitutional error.[*] Inasmuch as the case primarily involves the application of settled law to a highly unusual set of facts, I continue to feel that plenary review of the case is |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | This case presents the question whether a noncontributory, compulsory pension plan constitutes a "security" within the meaning of the Securities Act of 19 and the Securities Exchange Act of 194 (Securities Acts). I In 1954 multiemployer collective bargaining between Local 705 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America and Chicago trucking firms produced a pension plan for employees represented by the Local. The plan was compulsory and noncontributory. Employees had no choice as to participation in the plan, and did not have the option of demanding that the employer's contribution be paid directly to them as a substitute for pension eligibility. The employees paid nothing to the plan themselves.[1] *554 The collective-bargaining agreement initially set employer contributions to the Pension Trust Fund at $2 a week for each man-week of covered employment.[2] The Board of Trustees of the Fund, a body composed of an equal number of employer and union representatives, was given sole authority to set the level of benefits but had no control over the amount of required employer contributions. Initially, eligible employees received $75 a month in benefits upon retirement. Subsequent collective-bargaining agreements called for greater employer contributions, which in turn led to higher benefit payments for retirees. At the time respondent brought suit, employers contributed $21.50 per employee man-week and pension payments ranged from $425 to $525 a month depending on age at retirement.[] In order to receive a pension an employee was required to have 20 years of continuous service, including time worked before the start of the plan. The meaning of "continuous service" is at the center of this dispute. Respondent began working as a truckdriver in the Chicago area in 1950, and joined Local 705 the following year. When the plan first went into effect, respondent automatically received 5 years' credit toward the 20-year service requirement because of his earlier work experience. *555 He retired in 197 and applied to the plan's administrator for a pension. The administrator determined that respondent was ineligible because of a break in service between December 1960 and July 1961.[4] Respondent appealed the decision to the trustees, who affirmed. Respondent then asked the trustees to waive the continuous-service rule as it applied to him. After the trustees refused to waive the rule, respondent brought suit in federal court against the International Union (Teamsters), Local 705 (Local), and Louis Peick, a trustee of the Fund. Respondent's complaint alleged that the Teamsters, the Local, and Peick misrepresented and omitted to state material facts with respect to the value of a covered employee's interest in the |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | to the value of a covered employee's interest in the pension plan. Court I of the complaint charged that these misstatements and omissions constituted a fraud in connection with the sale of a security in violation of 10 (b) of the Securities Exchange Act of 194, 15 U.S. C. 78j (b), and the Securities and Exchange Commission's Rule 10b-5, 17 CFR 240.10b-5 Count II charged that the same conduct amounted to a violation of 17 (a) of the Securities Act of 19, as amended, 15 U.S. C. 77q. Other counts alleged violations of various labor-law and common-law duties.[5] Respondent sought to proceed on *556 behalf of all prospective beneficiaries of Teamsters pension plans and against all Teamsters pension funds.[6] The petitioners moved to dismiss the first two counts of the complaint on the ground that respondent had no cause of action under the Securities Acts. The District Court denied the motion. It held that respondent's interest in the Pension Fund constituted a security within the meaning of 2 (1) of the Securities Act, 15 U.S. C. 77b (1), and (a) (10) of the Securities Exchange Act, 15 U.S. C. 78c (a) (10),[7] because the plan created an "investment contract" as that term had been interpreted in It also determined that there had been a "sale" of this interest to respondent within the meaning of 2 () of the Securities Act, as amended, 15 U.S. C. 77b (), and (a) (14) of the Securities Exchange Act, 15 U.S. C. 78c (a) (14).[8] It *557 believed respondent voluntarily gave value for his interest in the plan, because he had voted on collective-bargaining agreements that chose employer contributions to the Fund instead of other wages or benefits. The order denying the motion to dismiss was certified for appeal pursuant to 28 U.S. C. 1292 (b), and the Court of Appeals for the Seventh Circuit affirmed. Relying on its perception of the economic realities of pension plans and various actions of Congress and the SEC with respect to such plans, the court ruled that respondent's interest in the Pension Fund was a "security." According to the court, a "sale" took place either when respondent ratified a collective-bargaining agreement embodying the Fund or when he accepted or retained covered employment instead of seeking other work.[9] The court did not believe the subsequent enactment of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S. C. 1001 et seq., affected the application of the Securities Acts to pension plans, as the requirements and purposes of ERISA were perceived to be different from those of the |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | ERISA were perceived to be different from those of the Securities Acts.[10] We granted certiorari, and now reverse. *558 II "The starting point in every case involving construction of a statute is the language itself." Blue Chip ; see Ernst & In spite of the substantial use of employee pension plans at the time they were enacted, neither 2 (1) of the Securities Act nor (a) (10) of the Securities Exchange Act, which define the term "security" in considerable detail and with numerous examples, refers to pension plans of any type. Acknowledging this omission in the statutes, respondent contends that an employee's interest in a pension plan is an "investment contract," an instrument which is included in the statutory definitions of a security.[11] To determine whether a particular financial relationship constitutes an investment contract, "[t]he test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others." This test is to be applied in light of "the substancethe economic realities of the transaction rather than the names that may have been employed by the parties." United Housing Foundation, Accord, ; Cf. ("[O]ne must apply a test in terms of the purposes of the Federal Acts"). Looking separately at each element of the test, it is apparent that an employee's participation in a noncontributory, compulsory pension plan such as the Teamsters' does not comport with the commonly held understanding of an investment contract. A. Investment of Money An employee who participates in a noncontributory, compulsory pension plan by definition makes no payment into the pension fund. He only accepts employment, one of the conditions of which is eligibility for a possible benefit on retirement. Respondent contends, however, that he has "invested" in the Pension Fund by permitting part of his compensation from his employer to take the form of a deferred pension benefit. By allowing his employer to pay money into the Fund, and by contributing his labor to his employer in return for these payments, respondent asserts he has made the kind of investment which the Securities Acts were intended to regulate. In order to determine whether respondent invested in the Fund by accepting and remaining in covered employment, it is necessary to look at the entire transaction through which he obtained a chance to receive pension benefits. In every decision of this Court recognizing the presence of a "security" under the Securities Acts, the person found to have been an investor chose to give up a specific consideration in return for a separable financial interest with the |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | consideration in return for a separable financial interest with the characteristics of a security. See ; ; Variable Annuity Life Ins. ; ; Even in those cases where the interest acquired had intermingled security and nonsecurity aspects, the interest obtained had "to a very substantial degree elements of investment contracts" Variable Annuity Life Ins. In every case the purchaser gave up some tangible and definable consideration in return for an interest that had substantially the characteristics of a security. In a pension plan such as this one, by contrast, the purported investment is a relatively insignificant part of an employee's total and indivisible compensation package. No portion of an employee's compensation other than the potential pension benefits has any of the characteristics of a security, yet these noninvestment interests cannot be segregated from the possible pension benefits. Only in the most abstract sense may it be said that an employee "exchanges" some portion of his labor in return for these possible benefits.[12] He surrenders his labor as a whole, and in return receives a compensation package that is substantially devoid of aspects resembling a security. His decision to accept and retain covered employment may have only an attenuated relationship, if any, to perceived investment possibilities of a future pension. Looking at the economic realities, it seems clear that an employee is selling his labor primarily to obtain a livelihood, not making an investment. Respondent also argues that employer contributions on his behalf constituted his investment into the Fund. But it is inaccurate to describe these payments as having been "on behalf" of any employee. The trust agreement used employee man-weeks as a convenient way to measure an employer's *561 overall obligation to the Fund, not as a means of measuring the employer's obligation to any particular employee. Indeed, there was no fixed relationship between contributions to the Fund and an employee's potential benefits. A pension plan with "defined benefits," such as the Local's, does not tie a qualifying employee's benefits to the time he has worked. See n. One who has engaged in covered employment for 20 years will receive the same benefits as a person who has worked for 40, even though the latter has worked twice as long and induced a substantially larger employer contribution.[1] Again, it ignores the economic realities to equate employer contributions with an investment by the employee. B. Expectation of Profits From a Common Enterprise As we observed in Forman, the "touchstone" of the test "is the presence of an investment in a common venture premised on a reasonable expectation of profits to be |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | venture premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others." The Court of Appeals believed that Daniel's expectation of profit derived from the Fund's successful management and investment of its assets. To the extent pension benefits exceeded employer contributions and depended on earnings from the assets, it was thought they contained a profit element. The Fund's trustees provided the managerial efforts which produced this profit element. As in other parts of its analysis, the court below found an expectation of profit in the pension plan only by focusing on one of its less important aspects to the exclusion of its more significant elements. It is true that the Fund, like other holders of large assets, depends to some extent on earnings *562 from its assets. In the case of a pension fund, however, a far larger portion of its income comes from employer contributions, a source in no way dependent on the efforts of the Fund's managers. The Local 705 Fund, for example, earned a total of $1 million through investment of its assets between February 1955 and January During this same period employer contributions totaled $15 million.[14] Not only does the greater share of a pension plan's income ordinarily come from new contributions, but unlike most entrepreneurs who manage other people's money, a plan usually can count on increased employer contributions, over which the plan itself has no control, to cover shortfalls in earnings.[15] The importance of asset earnings in relation to the other benefits received from employment is diminished further by the fact that where a plan has substantial preconditions to vesting, the principal barrier to an individual employee's realization of pension benefits is not the financial health of the fund. Rather, it is his own ability to meet the fund's eligibility requirements. Thus, even if it were proper to describe the benefits as a "profit" returned on some hypothetical investment by the employee, this profit would depend primarily on the employee's efforts to meet the vesting requirements, rather than the fund's investment success.[16] When viewed in light of the total compensation package an employee must receive in order to be eligible for pension benefits, it becomes clear that the possibility of participating in a plan's asset earnings "is far too speculative and insubstantial to bring the entire transaction within the Securities Acts," Forman, *56 III The court below believed that its construction of the term "security" was compelled not only by the perceived resemblance of a pension plan to an investment contract but also by various actions of |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | to an investment contract but also by various actions of Congress and the SEC with regard to the Securities Acts. In reaching this conclusion, the court gave great weight to the SEC's explanation of these events, an explanation which for the most part the SEC repeats here. Our own review of the record leads us to believe that this reliance on the SEC's interpretation of these legislative and administrative actions was not justified. A. Actions of Congress The SEC in its amicus curiae brief refers to several actions of Congress said to evidence an understanding that pension plans are securities. A close look at each instance, however, reveals only that Congress might have believed certain kinds of pension plans, radically different from the one at issue here, came within the coverage of the Securities Acts. There is no evidence that Congress at any time thought noncontributory plans similar to the one before us were subject to federal regulation as securities. The first action cited was the rejection by Congress in 194 of an amendment to the Securities Act that would have exempted employee stock investment and stock option plans from the Act's registration requirements.[17] The amendment passed the Senate but was eliminated in conference. The legislative history of the defeated proposal indicates it was *564 intended to cover plans under which employees contributed their own funds to a segregated investment account on which a return was realized. See H. R. Conf. Rep. No. 188, 7d Cong., 2d Sess., 41 (194); Hearings before the House Committee on Interstate and Foreign on Proposed Amendments to the Securities Act of 19 and to the Securities Exchange Act of 194, 77th Cong., 1st Sess., pt. 1, pp. 895-896 (1941). In rejecting the amendment, Congress revealed a concern that certain interests having the characteristics of a security not be excluded from Securities Act protection simply because investors realized their return in the form of retirement benefits. At no time, however, did Congress indicate that pension benefits in and of themselves gave a transaction the characteristics of a security. The SEC also relies on a 1970 amendment of the Securities Act which extended 's exemption from registration to include "any interest or participation in a single or collective trust fund maintained by a bank which interest or participation is issued in connection with a stock bonus, pension, or profit-sharing plan which meets the requirements for qualification under section 401 of title 26," (a) (2) of the Securities Act, as amended, 84 Stat. 144, 1498, 15 U.S. C. 77c (a) (2). It argues that in creating a |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | C. 77c (a) (2). It argues that in creating a registration exemption, the amendment manifested Congress' understanding that the interests covered by the amendment otherwise were subject to the Securities Acts.[18] It interprets "interest or participation in a single trust fund issued in connection with a stock bonus, pension, or profit-sharing plan" as referring to a prospective beneficiary's interest in a pension fund. But this construction of the 1970 *565 amendment ignores that measure's central purpose, which was to relieve banks and insurance companies of certain registratration obligations. The amendment recognized only that a pension plan had "an interest or participation" in the fund in which its assets were held, not that prospective beneficiaries of a plan had any interest in either the plan's bank-maintained assets or the plan itself.[19] B. SEC Interpretation The court below believed, and it now is argued to us, that almost from its inception the SEC has regarded pension plans as falling within the scope of the Securities Acts. We are asked to defer to what is seen as a longstanding interpretation of these statutes by the agency responsible for their *566 administration. But there are limits, grounded in the language, purpose, and history of the particular statute, on how far an agency properly may go in its interpretative role. Although these limits are not always easy to discern, it is clear here that the SEC's position is neither longstanding nor even arguably within the outer limits of its authority to interpret these Acts.[20] As we have demonstrated above, the type of pension plan at issue in this case bears no resemblance to the kind of financial interests the Securities Acts were designed to regulate. Further, the SEC's present position is flatly contradicted by its past actions. Until the instant litigation arose, the public record reveals no evidence that the SEC had ever considered the Securities Acts to be applicable to noncontributory pension plans. In 1941, the SEC first articulated the position that voluntary, contributory plans had investment characteristics that rendered them "securities" under the Acts. At the same time, however, the SEC recognized that noncontributory *567 plans were not covered by the Securities Acts because such plans did not involve a "sale" within the meaning of the statutes. Opinions of Assistant General Counsel, [1941-1944 Transfer Binder] CCH Fed. Sec. L. Serv. ¶ 75,195 (1941); Hearings before the House Committee on Interstate and Foreign on Proposed Amendments to the Securities Act of 19 and to the Securities Exchange Act of 194, 77th Cong., 1st Sess., 895, 896-897 (1941) (testimony of Commissioner Purcell).[21] In an attempt |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | 895, 896-897 (1941) (testimony of Commissioner Purcell).[21] In an attempt to reconcile these interpretations of the Securities Acts with its present stand, the SEC now augments its past position with two additional propositions. First, it is argued, noncontributory plans are "securities" even where a "sale" is not involved. Second, the previous concession that noncontributory plans do not involve a "sale" was meant to apply only to the registration and reporting requirements of the Securities Acts; for purposes of the antifraud provisions, a "sale" is involved. As for the first proposition, we observe that none of the SEC opinions, reports, or testimony cited to us address the question. As for the second, the record is unambiguously to the contrary.[22] Both in its 1941 statements *568 and repeatedly since then, the SEC has declared that its "no sale" position applied to the Securities Acts as a whole. See opinions of Assistant General Counsel, [1941-1944 Transfer Binder] CCH Fed. Sec. L. Serv. ¶ 75,195, p. 75,87 (1941); Hearings before the House Committee on Interstate and Foreign ; Institutional Investor Study Report of the Securities and Exchange Commission, H. R. Doc. No. 92-64, pt. p. 996 (1971) ("[T]he Securities Act does not apply"); Hearings before the Subcommittee on Welfare and Pension Funds of the Senate Committee on Labor and Public Welfare on Welfare and Pension Plans Investigation, 84th Cong., 1st Sess., pt. pp. 94-946 (1955). Congress acted on this understanding when it proceeded to develop the legislation that became ERISA. See, e. g., Interim Report of Activities of the Private Welfare and Pension Plan Study, 1971, S. Rep. No. 92-64, p. 96 (1972) ("Pension and profit-sharing plans are exempt from coverage under the Securities Act of 19 unless the plan is a voluntary contributory *569 pension plan and invests in the securities of the employer company an amount greater than that paid into the plan by the employer") (emphasis added). As far as we are aware, at no time before this case arose did the SEC intimate that the antifraud provisions of the Securities Acts nevertheless applied to noncontributory pension plans. IV If any further evidence were needed to demonstrate that pension plans of the type involved are not subject to the Securities Acts, the enactment of ERISA in 1974, 88 Stat., 829, would put the matter to rest. Unlike the Securities Acts, ERISA deals expressly and in detail with pension plans. ERISA requires pension plans to disclose specified information to employees in a specified manner, see 29 U.S. C. 1021-100, in contrast to the indefinite and uncertain disclosure obligations imposed by the antifraud |
Justice Powell | 1,979 | 17 | majority | Teamsters v. Daniel | https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/ | the indefinite and uncertain disclosure obligations imposed by the antifraud provisions of the Securities Acts, see Santa Fe Industries, 40 U.S. 462, ; TSC Industries, 426 U.S. 48 Further, ERISA regulates the substantive terms of pension plans, setting standards for plan funding and limits on the eligibility requirements an employee must meet. For example, with respect to the underlying issue in this case whether respondent served long enough to receive a pension 20 (a) of ERISA, 29 U.S. C. 105 (a), now sets the minimum level of benefits an employee must receive after accruing specified years of service, and 20 (b), 29 U.S. C. 105 (b), governs continuous-service requirements. Thus, if respondent had retired after 105 took effect, the Fund would have been required to pay him at least a partial pension. The Securities Acts, on the other hand, do not purport to set the substantive terms of financial transactions. The existence of this comprehensive legislation governing the use and terms of employee pension plans severely undercuts all arguments for extending the Securities Acts to noncontributory, *570 compulsory pension plans. Congress believed that it was filling a regulatory void when it enacted ERISA, a belief which the SEC actively encouraged. Not only is the extension of the Securities Acts by the court below unsupported by the language and history of those Acts, but in light of ERISA it serves no general purpose. See 40 U.S. 99, Cf. Boys Markets, 98 U.S. 25, Whatever benefits employees might derive from the effect of the Securities Acts are now provided in more definite form through ERISA. V We hold that the Securities Acts do not apply to a noncontributory, compulsory pension plan. Because the first two counts of respondent's complaint do not provide grounds for relief in federal court, the District Court should have granted the motion to dismiss them. The judgment below is therefore Reversed. MR. JUSTICE STEVENS took no part in the consideration or decision of these cases. MR. |
Justice White | 1,993 | 6 | concurring | Saudi Arabia v. Nelson | https://www.courtlistener.com/opinion/112834/saudi-arabia-v-nelson/ | According to respondents' complaint, Scott Nelson's employer retaliated against him for reporting safety problems by "summon[ing him] to the hospital's security office from which he was transported to a jail cell." App. 5. Once there, he allegedly was "shackled, tortured and beaten by persons acting at the direction, instigation, provocation, instruction or request of" petitionersSaudi Arabia, King Faisal Specialist Hospital, and Royspec. at 5, 14, 18. The majority concludes that petitioners enjoy sovereign immunity because respondents' action is not "based upon a commercial activity." I disagree. I nonetheless concur in the judgment because in my view the commercial conduct upon which respondents base their complaint was not "carried on in the United States." I A As the majority notes, the first step in the analysis is to identify the conduct on which the action is based. Respondents have pointed to two distinct possibilities. The first, seemingly pressed at trial and on appeal, consists of the recruiting and hiring activity in the United States. See Brief for Appellant in No. 89-5981 (CA11), pp. 12-15. Although this conduct would undoubtedly qualify as "commercial," I agree with the majority that it is "not the basis for the Nelsons' suit," ante, at 358, for it is unrelated to the elements of respondents' complaint. In a partial change of course, respondents suggest to this Court both in their brief and at oral argument that we focus on the hospital's commercial activity in Saudi Arabia, its employment practices and disciplinary procedures. Under this view, the Court would then work its way back to the recruiting and hiring activity in order to establish that the commercial conduct in fact had "substantial contact" with the United *365 States. See Brief for Respondents 22, 24-25, 31; Tr. of Oral Arg. 44-45. The majority never reaches this second stage, finding instead that petitioners' conduct is not commercial because it "is not the sort of action by which private parties can engage in commerce." Ante, at 362. If by that the majority means that it is not the manner in which private parties ought to engage in commerce, I wholeheartedly agree. That, however, is not the relevant inquiry. Rather, the question we must ask is whether it is the manner in which private parties at times do engage in commerce. B To run and operate a hospital, even a public hospital, is to engage in a commercial enterprise. The majority never concedes this point, but it does not deny it either, and to my mind the matter is self-evident. By the same token, warning an employee when he blows the whistle |
Justice White | 1,993 | 6 | concurring | Saudi Arabia v. Nelson | https://www.courtlistener.com/opinion/112834/saudi-arabia-v-nelson/ | same token, warning an employee when he blows the whistle and taking retaliatory action, such as harassment, involuntary transfer, discharge, or other tortious behavior, although not prototypical commercial acts, are certainly well within the bounds of commercial activity. The House and Senate Reports accompanying the legislation virtually compel this conclusion, explaining as they do that "a foreign government's employment or engagement of laborers, clerical staff or marketing agents would be among those included within" the definition of commercial activity. H. R. Rep. No. 94 1487, p. 16 (House Report); S. Rep. No. 94-1310, p. 16 (Senate Report). Nelson alleges that petitioners harmed him in the course of engaging in their commercial enterprise, as a direct result of their commercial acts. His claim, in other words, is "based upon commercial activity." Indeed, I am somewhat at a loss as to what exactly the majority believes petitioners have done that a private employer could not. As countless cases attest, retaliation for *366 whistle-blowing is not a practice foreign to the marketplace.[1] Congress passed a statute in response to such behavior, see Whistleblower Protection Act of 5 U.S. C. 1213 et seq. (1988 ed., Supp. III), as have numerous States. On occasion, private employers also have been known to retaliate by enlisting the help of police officers to falsely arrest employees. See, e. g., cert. denied, More generally, private parties have been held liable for conspiring with public authorities to effectuate an arrest, see, e. g., and for using private security personnel for the same purposes, see Therefore, had the hospital retaliated against Nelson by hiring thugs to do the job, I assume the majorityno longer able to describe this conduct as "a foreign state's exercise of the power of its police," ante, at 361would consent to calling it "commercial." For, in such circumstances, the state-run hospital would be operating as any private participant in the marketplace and respondents' action would be based on the operation by Saudi Arabia's agents of a commercial business.[2] *367 At the heart of the majority's conclusion, in other words, is the fact that the hospital in this case chose to call in government security forces. See ante, at 362. I find this fixation on the intervention of police officers, and the ensuing characterization of the conduct as "peculiarly sovereign in nature," ante, at 361, to be misguided. To begin, it fails to capture respondents' complaint in full. Far from being directed solely at the activities of the Saudi police, it alleges that agents of the hospital summoned Nelson to its security office because he reported safety concerns |
Justice White | 1,993 | 6 | concurring | Saudi Arabia v. Nelson | https://www.courtlistener.com/opinion/112834/saudi-arabia-v-nelson/ | Nelson to its security office because he reported safety concerns and that the hospital played a part in the subsequent beating and imprisonment. App. 5, 14. Without more, that type of behavior hardly qualifies as sovereign. Thus, even assuming for the sake of argument that the role of the official police somehow affected the nature of petitioners' conduct, the claim cannot be said to "res[t] entirely upon activities sovereign in character." See ante, at 358, n. 4. At the very least it "consists of both commercial and sovereign elements," thereby presenting the specific question the majority chooses to elude. See The majority's single-minded focus on the exercise of police power, while certainly simplifying the case, thus hardly does it justice.[3] *368 Reliance on the fact that Nelson's employer enlisted the help of public rather than private security personnel is also at odds with Congress' intent. The purpose of the commercial exception being to prevent foreign states from taking refuge behind their sovereignty when they act as market participants, it seems to me that this is precisely the type of distinction we should seek to avoid. Because both the hospital and the police are agents of the state, the case in my mind turns on whether the sovereign is acting in a commercial capacity, not on whether it resorts to thugs or government officers to carry on its business. That, when the hospital calls in security to get even with a whistle-blower, it comes clothed in police apparel says more about the state-owned nature of the commercial enterprise than about the noncommercial nature of its tortious conduct. I had thought the *369 issue put to rest some time ago when, in a slightly different context, Chief Justice Marshall observed: "It is, we think, a sound principle, that when a government becomes a partner in any trading company, it devests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen. Instead of communicating to the company its privileges and its prerogatives, it descends to a level with those with whom it associates itself, and takes the character which belongs to its associates, and to the business which is to be transacted." Bank of United See also Alfred Dunhill of London, C Contrary to the majority's suggestion, ante, at 363, this conclusion does not involve inquiring into the purpose of the conduct. Matters would be different, I suppose, if Nelson had been recruited to work in the Saudi police force and, having reported safety violations, suffered retributive punishment, for there the Saudi |
Justice White | 1,993 | 6 | concurring | Saudi Arabia v. Nelson | https://www.courtlistener.com/opinion/112834/saudi-arabia-v-nelson/ | reported safety violations, suffered retributive punishment, for there the Saudi authorities would be engaged in distinctly sovereign activities. Cf. House Report, at 16 ("Also public or governmental and not commercial in nature, would be the employment of diplomatic, civil service, or military personnel"); Senate Report, at 16. The same would be true if Nelson was a mere tourist in Saudi Arabia and had been summarily expelled by order of immigration officials. See In this instance, however, the state-owned hospital was engaged in ordinary commercial business and "[i]n their commercial capacities, foreign governments do not exercise powers peculiar to sovereigns. Instead, they exercise only those powers that can also be exercised by private *370 citizens." Alfred Dunhill, As we recently stated, "when a foreign government acts, not as regulator of a market, but in the manner of a private player within it, the foreign sovereign's actions are `commercial' within the meaning of the FSIA." Republic of That, I believe, is the case here. II Nevertheless, I reach the same conclusion as the majority because petitioners' commercial activity was not "carried on in the United States." The Act defines such conduct as "commercial activity having substantial contact with the United States." 28 U.S. C. 1603(e). Respondents point to the hospital's recruitment efforts in the United States, including advertising in the American media, and the signing of the employment contract in Miami. See Brief for Respondents 43-45. As I earlier noted, while these may very well qualify as commercial activity in the United States, they do not constitute the commercial activity upon which respondents' action is based. Conversely, petitioners' commercial conduct in Saudi Arabia, though constituting the basis of the Nelsons' suit, lacks a sufficient nexus to the United States. Neither the hospital's employment practices, nor its disciplinary procedures, has any apparent connection to this country. On that basis, I agree that the Act does not grant the Nelsons access to our courts. Justice Kennedy, with whom Justice Blackmun and Justice Stevens join as to Parts IB and II, concurring in part and dissenting in part. I join all of the Court's opinion except the last paragraph of Part II, where, with almost no explanation, the Court rules that, like the intentional tort claim, the claims based on negligent failure to warn are outside the subject-matter jurisdiction of the federal courts. These claims stand on a much different footing from the intentional tort claims for *371 purposes of the Foreign Sovereign Immunities Act (FSIA). In my view, they ought to be remanded to the District Court for further consideration. I A I agree |
Justice White | 1,993 | 6 | concurring | Saudi Arabia v. Nelson | https://www.courtlistener.com/opinion/112834/saudi-arabia-v-nelson/ | the District Court for further consideration. I A I agree with the Court's holding that the Nelsons' claims of intentional wrongdoing by the hospital and the Kingdom of Saudi Arabia are based on sovereign, not commercial, activity, and so fall outside the commercial activity exception to the grant of foreign sovereign immunity contained in 28 U.S. C. 1604. The intentional tort counts of the Nelsons' complaint recite the alleged unlawful arrest, imprisonment, and torture of Mr. Nelson by the Saudi police acting in their official capacities. These are not the sort of activities by which a private party conducts its business affairs; if we classified them as commercial, the commercial activity exception would in large measure swallow the rule of foreign sovereign immunity Congress enacted in the FSIA. B By the same token, however, the Nelsons' claims alleging that the hospital, the Kingdom, and Royspec were negligent in failing during their recruitment of Nelson to warn him of foreseeable dangers are based upon commercial activity having substantial contact with the United States. As such, they are within the commercial activity exception and the jurisdiction of the federal courts. Unlike the intentional tort counts of the complaint, the failure to warn counts do not complain of a police beating in Saudi Arabia; rather, they complain of a negligent omission made during the recruiting of a hospital employee in the United States. To obtain relief, the Nelsons would be obliged to prove that the hospital's recruiting agent did not tell Nelson about the foreseeable hazards of his prospective employment in Saudi Arabia. Under the Court's test, this omission is what the negligence counts are "based upon." See ante, at 356. *372 Omission of important information during employee recruiting is commercial activity as we have described it. See Republic of It seems plain that recruiting employees is an activity undertaken by private hospitals in the normal course of business. Locating and hiring employees implicates no power unique to the sovereign. In explaining the terms and conditions of employment, including the risks and rewards of a particular job, a governmental entity acts in "the manner of a private player within" the commercial marketplace. at Under the FSIA, as a result, it must satisfy the same general duties of care that apply to private actors under state law. If a private company with operations in Saudi Arabia would be obliged in the course of its recruiting activities subject to state law to tell a prospective employee about the risk of arbitrary arrest and torture by Saudi authorities, then so would King Faisal Specialist Hospital. The |
Justice White | 1,993 | 6 | concurring | Saudi Arabia v. Nelson | https://www.courtlistener.com/opinion/112834/saudi-arabia-v-nelson/ | Saudi authorities, then so would King Faisal Specialist Hospital. The recruiting activity alleged in the failure to warn counts of the complaint also satisfies the final requirement for invoking the commercial activity exception: that the claims be based upon commercial activity "having substantial contact with the United States." 28 U.S. C. 1603(e). Nelson's recruitment was performed by Hospital Corporation of America, Ltd. (HCA), a wholly owned subsidiary of a United States corporation, which, for a period of at least 16 years beginning in 1973, acted as the Kingdom of Saudi Arabia's exclusive agent for recruiting employees for the hospital. HCA in the regular course of its business seeks employees for the hospital in the American labor market. HCA advertised in an American magazine, seeking applicants for the position Nelson later filled. Nelson saw the ad in the United States and contacted HCA in Tennessee. After an interview in Saudi Arabia, Nelson returned to Florida, where he signed an employment contract and underwent personnel processing and application procedures. Before leaving to take his job at the hospital, Nelson attended an *373 orientation session conducted by HCA in Tennessee for new employees. These activities have more than substantial contact with the United States; most of them were "carried on in the United States." 28 U.S. C. 1605(a)(2). In alleging that the petitioners neglected during these activities to tell him what they were bound to under state law, Nelson meets all of the statutory requirements for invoking federal jurisdiction under the commercial activity exception. II Having met the jurisdictional prerequisites of the FSIA, the Nelsons' failure to warn claims should survive petitioners' motion under Federal Rule of Civil Procedure 12(b)(1) to dismiss for want of subject-matter jurisdiction. Yet instead of remanding these claims to the District Court for further proceedings, the majority dismisses them in a single short paragraph. This is peculiar, since the Court suggests no reason to question the conclusion that the failure to warn claims are based on commercial activity having substantial contact with the United States; indeed, the Court does not purport to analyze these claims in light of the statutory requirements for jurisdiction. The Court's summary treatment may stem from doubts about the underlying validity of the negligence cause of action. The Court dismisses the claims because it fears that if it did not, "a plaintiff could recast virtually any claim of intentional tort committed by a sovereign act as a claim of failure to warn, simply by charging the defendant with an obligation to announce its own tortious propensity before indulging it." Ante, at 363. In the |
Justice White | 1,993 | 6 | concurring | Saudi Arabia v. Nelson | https://www.courtlistener.com/opinion/112834/saudi-arabia-v-nelson/ | tortious propensity before indulging it." Ante, at 363. In the majority's view, "[t]o give jurisdictional significance to this feint of language would effectively thwart the Act's manifest purpose to codify the restrictive theory of foreign sovereign immunity." These doubts, however, are not relevant to the analytical task at hand. *374 The FSIA states that with respect to any claim against a foreign sovereign that falls within the statutory exceptions to immunity listed in 1605, "the foreign state shall be liable in the same manner and to the same extent as a private individual under like circumstances." 28 U.S. C. 1606. The Act incorporates state law and "was not intended to affect the substantive law determining the liability of a foreign state." First Nat. City If the governing state law, which has not yet been determined, would permit an injured person to plead and prove a tortious wrong for failure to warn against a private defendant under facts similar to those in this case, we have no authority under the FSIA to ordain otherwise for those suing a sovereign entity. "[W]here state law provides a rule of liability governing private individuals, the FSIA requires the application of that rule to foreign states in like circumstances." The majority's citation of United see ante, at 363, provides no authority for dismissing the failure to warn claims. Shearer refused to permit a plaintiff to recast in negligence terms what was essentially an intentional tort claim, but that case was decided under the doctrine of The Feres doctrine is a creature of federal common law that allows the Court much greater latitude to make rules of pleading than we have in the current case. Here, our only task is to interpret the explicit terms of the FSIA. The Court's conclusion in Shearer was also based upon the fact that the intentional tort exception to the Federal Tort Claims Act at issue there, 28 U.S. C. 2680(h), precludes "[a]ny claim arising out of" the specified intentional torts. This language suggests that Congress intended immunity under the FTCA to cover more than those claims which simply sounded in intentional tort. There is no equivalent language in the commercial activity *375 exception to the FSIA. It is also worth noting that the Court has not adopted a uniform rule barring the recasting of intentional tort claims as negligence claims under the FTCA; under certain circumstances, we have permitted recovery in that situation. See As a matter of substantive tort law, it is not a novel proposition or a play on words to describe with precision the conduct upon |
Justice White | 1,993 | 6 | concurring | Saudi Arabia v. Nelson | https://www.courtlistener.com/opinion/112834/saudi-arabia-v-nelson/ | play on words to describe with precision the conduct upon which various causes of action are based or to recognize that a single injury can arise from multiple causes, each of which constitutes an actionable wrong. See Restatement (Second) of Torts 447-449 (1965); ; In for example, this Court permitted an action for negligent supervision to go forward under the FTCA when a suit based upon the intentional tort that was the immediate cause of injury was barred under the statute. See As the Court observed, "it is both settled and undisputed that in at least some situations the fact that an injury was directly caused by an assault or battery will not preclude liability against the Government for negligently allowing the assault to occur." We need not determine, however, that on remand the Nelsons will succeed on their failure to warn claims. Quite apart from potential problems of state tort law that might bar recovery, the Nelsons appear to face an obstacle based upon the former adjudication of their related lawsuit against Saudi Arabia's recruiting agent, HCA. The District Court dismissed that suit, which raised an identical failure to warn claim, not only as time barred, but also on the merits. See Nelson v. Hospital Corp. of America, No. 88-0484CIV Nesbitt (SD Fla., Nov. 1, 1990). That decision was affirmed on appeal, judgment order reported at and may be entitled to preclusive effect with respect to the Nelsons' similar claims against the sovereign defendants, *376 whose recruitment of Nelson took place almost entirely through HCA. See generally ; ); 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure 4463, p. 567 (1981) (recognizing general rule that "judgment in an action against either party to a vicarious liability relationship establishe[s] preclusion in favor of the other"); Restatement (Second) of Judgments 51 (1982). But the question of claim preclusion, like the substantive validity under state law of the Nelsons' negligence cause of action, has not yet been litigated and is outside the proper sphere of our review. "[I]t is not our practice to reexamine a question of state law of [this] kind or, without good reason, to pass upon it in the first instance." That a remand to the District Court may be of no avail to the Nelsons is irrelevant to our task here; if the jurisdictional requirements of the FSIA are met, the case must be remanded to the trial court for further proceedings. In my view, the FSIA conferred subject-matter jurisdiction on the District Court to entertain the failure to warn claims, and with all |
Justice Souter | 2,001 | 20 | concurring | Nevada v. Hicks | https://www.courtlistener.com/opinion/118454/nevada-v-hicks/ | I agree that the Fallon Paiute-Shoshone Tribal Court had no jurisdiction to entertain Hicks's claims against the petitioning state officers here, and I join the Court's opinion. While I agree with the Court's analysis as well as its conclusion, I would reach that point by a different route. Like the Court, I take to be the source of the first principle on tribal-court civil jurisdiction, see Atkinson Trading But while the Court gives emphasis to measuring tribal authority here in light of the State's interest in executing its own legal process to enforce state law governing off-reservation conduct, ante, at 360-3, I would go right to `s rule that a tribe's civil jurisdiction generally stops short of nonmember defendants, subject only to two exceptions, one turning on "consensual relationships," the other on respect for "the political integrity, the economic security, or the health or welfare of the tribe,"[1] applied this presumption against tribal jurisdiction to nonmember conduct on fee land within a reservation; I would also apply it where, as here, a nonmember acts on tribal or trust land, and I would thus make it explicit that land status within a reservation is not a primary jurisdictional *376 fact, but is relevant only insofar as it bears on the application of one of `s exceptions to a particular case. Insofar as I rest my conclusion on the general jurisdictional presumption, it follows for me that, although the holding in this case is "limited to the question of tribal-court jurisdiction over state officers enforcing state law," ante, at 358, n. 2, one rule independently supporting that holding (that as a general matter "the inherent sovereign powers of an Indian tribe do not extend to the activities of nonmembers of the tribe," ante, at 359) is not so confined. I Petitioners are certainly correct that "[t]ribal adjudicatory jurisdiction over nonmembers is ill-defined," Reply Brief for Petitioners 16, since this Court's own pronouncements on the issue have pointed in seemingly opposite directions. Compare, e. g., Santa Clara and United with, e. g., however, clarified tribal courts' criminal jurisdiction (in holding that they had none as to non-Indians), and that decision is now seen as a significant step on the way to "the pathmarking case concerning tribal civil authority over nonmembers," The path marked best is the rule *377 that, at least as a presumptive matter, tribal courts lack civil jurisdiction over nonmembers.[2] To be sure, does not of its own force resolve the jurisdictional issue in this case. There, while recognizing that the parties had "raised broad questions about the power of the |
Justice Souter | 2,001 | 20 | concurring | Nevada v. Hicks | https://www.courtlistener.com/opinion/118454/nevada-v-hicks/ | parties had "raised broad questions about the power of the Tribe to regulate [the conduct of] non-Indians on the reservation," we noted that the issue before us was a "narrow one." 450 U.S., at Specifically, we said, the question presented concerned only the power of an Indian tribe to regulate the conduct of nonmembers "on reservation land owned in fee by nonmembers of the Tribe." Here, it is undisputed, the acts complained of occurred on reservation land "controlled by a tribe." Pet. for Cert. 24. But although the distinction between tribal and fee land (and, accordingly, between and this case) surely exists, it does not in my mind call for a different result. I see the legal principles that animated our presumptive preclusion of tribal jurisdiction in as counseling a similar rule as to regulatory, and hence adjudicatory, jurisdiction here. In the Court began its discussion of tribes' "inherent authority" by noting that "the Indian tribes have lost many of the attributes of sovereignty." *378 In "distinguish[ing] between those inherent powers retained by the tribe and those divested," the Court relied on a portion of the opinion in United from which it quoted at length: "`The areas in which implicit divestiture of sovereignty has been held to have occurred are those involving the relations between an Indian tribe and non- members of the tribe. "`These limitations rest on the fact that the dependent status of Indian tribes within our territorial jurisdiction is necessarily inconsistent with their freedom independently to determine their external relations. But the powers of self-government, including the power to prescribe and enforce internal criminal laws, are of a different type. They involve only the relations among members of a tribe. Thus, they are not such powers as would necessarily be lost by virtue of a tribe's dependent status.' " The emphasis in these passages (supplied by the Court, not by me) underscores the distinction between tribal members and nonmembers, and seems clearly to indicate, without restriction to the criminal law, that the inherent authority of the tribes has been preserved over the former but not the latter. In fact, after quoting Wheeler, the Court invoked which (as already noted) had imposed a per se bar to tribal-court criminal jurisdiction over non-Indians, even with respect to conduct occurring on tribal land. The Court remarked that, "[t]hough only determined inherent tribal authority in criminal matters, the principles on which it relied" support a more "general proposition" applicable in civil cases as well, namely, that "the inherent sovereign powers of an Indian tribe do not extend to the activities of |
Justice Souter | 2,001 | 20 | concurring | Nevada v. Hicks | https://www.courtlistener.com/opinion/118454/nevada-v-hicks/ | an Indian tribe do not extend to the activities of nonmembers of the tribe." Accordingly, the Court in repeatedly pressed the member-nonmember distinction, reiterating *379 at one point, for example, that while "the Indian tribes retain their inherent power to determine tribal membership, to regulate domestic relations among members, and to prescribe rules of inheritance for members," the "exercise of tribal power beyond what is necessary to protect tribal self-government or to control internal relations is inconsistent with the dependent status of the tribes, and so cannot survive without express congressional delegation." ; cf. v. Schlie, ("The concept of sovereignty applicable to Indian tribes need not include the power to prosecute nonmembers. This power, unlike the ability to maintain law and order on the reservation and to exclude nondesireable nonmembers, is not essential to the tribe's identity or its self-governing status"), rev'd sub nom. To `s "general proposition" confining the subjects of tribal jurisdiction to tribal members, the Court appended two exceptions that could support tribal jurisdiction in some civil matters. First, a tribe may "regulate the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements." And second, a tribe may regulate nonmember conduct that "threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe." -566.[3] But unless one of these exceptions applies, the "general *380 proposition" governs and the tribe's civil jurisdiction does "not extend to the activities of nonmembers of the tribe." In Strate, we expressly extended the framework, originally applied as a measure of tribes' civil regulatory jurisdiction, to limit tribes' civil adjudicatory jurisdiction. We repeated that "absent express authorization by federal statute or treaty, tribal jurisdiction over the conduct of nonmembers exists only in limited circumstances." 520 U.S., at Quoting we further explained that "[i]n the main" (that is, subject to the two exceptions outlined in the opinion), "`the inherent sovereign powers of an Indian tribe'those powers a tribe enjoys apart from express provision by treaty or statute'do not extend to the activities of nonmembers of the tribe.' " 520 U.S., at -446. Equally important for purposes here was our treatment of the following passage from Iowa Mut. Ins. which seemed to state a more expansive jurisdictional position and which had been cited by the Tribal Court in Strate in support of broad tribal-court civil jurisdiction over nonmembers: "`Tribal authority over the activities of non-Indians on reservation lands is an important part of tribal sovereignty. See 5-566 ; ; Fisher v. District Court |
Justice Souter | 2,001 | 20 | concurring | Nevada v. Hicks | https://www.courtlistener.com/opinion/118454/nevada-v-hicks/ | tribal sovereignty. See 5-566 ; ; Fisher v. District Court [of Sixteenth Judicial Dist. of Mont.], 424 U. S. [382,] 387-389 []. Civil jurisdiction over such activities presumptively lies in the tribal courts unless affirmatively limited by a specific treaty provision or federal statute' [480 U. S.]," The Strate petitioners fastened upon the statement that "civil jurisdiction over" the activities of nonmembers on reservation lands "presumptively lies in the tribal courts." But we resisted the overbreadth of the Iowa dictum. *381 We said that the passage "scarcely supports the view that the rule does not bear on tribal-court adjudicatory authority in cases involving nonmember defendants," -452, and stressed the "three informative citations" accompanying the statement, which mark the true contours of inherent tribal authority over nonmembers: "The first citation points to the passage in in which the Court advanced `the general proposition that the inherent sovereign powers of an Indian tribe do not extend to the activities of nonmembers of the tribe,' with two prime exceptions. The case cited second is Washington v. Confederated Tribes of Colville Reserva- tion, a decision the Court listed as illustrative of the first exception The third case noted in conjunction with the Iowa statement is Fisher v. District Court of Sixteenth Judicial Dist. of Mont., a decision the Court cited in support of the second exception" Accordingly, in explaining and distinguishing Iowa we confirmed in Strate what we had indicated in : that as a general matter, a tribe's civil jurisdiction does not extend to the "activities of non-Indians on reservation lands," Iowa and that the only such activities that trigger civil jurisdiction are those that fit within one of `s two exceptions. After Strate, it is undeniable that a tribe's remaining inherent civil jurisdiction to adjudicate civil claims arising out of acts committed on a reservation depends in the first instance on the character of the individual over whom jurisdiction is claimed, not on the title to the soil on which he acted. The principle on which and Strate were decided (like before them) looks first to human relationships, not land records, and it should make no difference per se whether acts committed on a reservation *382 occurred on tribal land or on land owned by a nonmember individual in fee. It is the membership status of the unconsenting party, not the status of real property, that counts as the primary jurisdictional fact.[4] II Limiting tribal-court civil jurisdiction this way not only applies the animating principle behind our precedents, but fits with historical assumptions about tribal authority and serves sound policy. As for |
Justice Souter | 2,001 | 20 | concurring | Nevada v. Hicks | https://www.courtlistener.com/opinion/118454/nevada-v-hicks/ | assumptions about tribal authority and serves sound policy. As for history, Justice Stevens has observed that "[i]n sharp contrast to the tribes' broad powers over their own members, tribal powers over nonmembers have always been narrowly confined." His point is exemplified by the early treaties with those who became known as the five civilized Tribes, which treaties "specifically granted the right of self-government to the tribes [but] specifically excluded jurisdiction over nonmembers." at n. 21 (citing Treaty with the Cherokees, Art. 5, (1835), Treaty with the Choctaws and Chickasaws, Art. 7, (1855), and Treaty with the Creeks and Seminoles, Art. 15, (1856)). In a similar vein, referring to 19th-century federal statutes setting the jurisdiction of the courts of those five Tribes, this Court said in In re Mayfield, that the "general object" of such measures was "to vest in the courts of the [Indian] nation jurisdiction of all controversies between Indians, or where a member of the nation is the only party to the proceeding, and to reserve to the courts *383 of the United States jurisdiction of all actions to which its own citizens are parties on either side." And, in fact, to this very day, general federal law prohibits Courts of Indian Offenses (tribunals established by regulation for tribes that have not organized their own tribal court systems) from exercising jurisdiction over unconsenting nonmembers. Such courts have "[c]ivil jurisdiction" only of those actions arising within their territory "in which the defendant is an Indian, and of all other suits between Indians and non-Indians which are brought before the court by stipulation of the parties." (a) (2000). A rule generally prohibiting tribal courts from exercising civil jurisdiction over nonmembers, without looking first to the status of the land on which individual claims arise, also makes sense from a practical standpoint, for tying tribes' authority to land status in the first instance would produce an unstable jurisdictional crazy quilt. Because land on Indian reservations constantly changes hands (from tribes to nonmembers, from nonmembers to tribal members, and so on), a jurisdictional rule under which land status was dispositive would prove extraordinarily difficult to administer and would provide little notice to nonmembers, whose susceptibility to tribal-court jurisdiction would turn on the most recent property conveyances. Cf. The ability of nonmembers to know where tribal jurisdiction begins and ends, it should be stressed, is a matter of real, practical consequence given "[t]he special nature of [Indian] tribunals," which differ from traditional American courts in a number of significant respects. To start with the most obvious one, it has been understood for more |
Justice Souter | 2,001 | 20 | concurring | Nevada v. Hicks | https://www.courtlistener.com/opinion/118454/nevada-v-hicks/ | the most obvious one, it has been understood for more than a century that the Bill of Rights and the Fourteenth Amendment do not of their own force apply to Indian tribes. See ; F. Cohen, Handbook of Federal Indian *384 Law 664-6 (1982 ed.) (hereinafter Cohen) ("Indian tribes are not states of the union within the meaning of the Constitution, and the constitutional limitations on states do not apply to tribes"). Although the Indian Civil Rights Act of 1968 (ICRA) makes a handful of analogous safeguards enforceable in tribal courts, 25 U.S. C. 1302, "the guarantees are not identical,"[5] and there is a "definite trend by tribal courts" toward the view that they "ha[ve] leeway in interpreting" the ICRA's due process and equal protection clauses and "need not follow the U. S. Supreme Court precedents `jot-for-jot,' " Newton, Tribal Court Praxis: One Year in the Life of Twenty Indian Tribal Courts, In any event, a presumption against tribal-court civil jurisdiction squares with one of the principal policy considerations underlying namely, an overriding concern that citizens who are not tribal members be "protected from unwarranted intrusions on their personal liberty," Tribal courts also differ from other American courts (and often from one another) in their structure, in the substantive law they apply, and in the independence of their judges. Although some modern tribal courts "mirror American courts" and "are guided by written codes, rules, procedures, and guidelines," tribal law is still frequently unwritten, being based instead "on the values, mores, and norms of a tribe and expressed in its customs, traditions, and practices," and is often "handed down orally or by example from one generation to another." Melton, Indigenous Justice Systems and Tribal Society, 79 Judicature 126, 130-131 (1995). The resulting law applicable in tribal courts is a complex "mix of tribal codes and federal, state, and traditional law," National American Indian Court Judges Assn., Indian *385 Courts and the Future 43 which would be unusually difficult for an outsider to sort out. Hence the practical importance of being able to anticipate tribal jurisdiction by reference to a fact more readily knowable than the title status of a particular plot of land. One further consideration confirms the point. It is generally accepted that there is no effective review mechanism in place to police tribal courts' decisions on matters of nontribal law, since tribal-court judgments based on state or federal law can be neither removed nor appealed to state or federal courts. Cf., e. g., 28 U.S. C. 1441(a) (removal of "any civil action brought in a State court of which |
Justice Souter | 2,001 | 20 | concurring | Nevada v. Hicks | https://www.courtlistener.com/opinion/118454/nevada-v-hicks/ | "any civil action brought in a State court of which the district courts of the United States have original jurisdiction"); 1257(a) (Supreme Court review of "judgments or decrees rendered by the highest court of a State" where federal law implicated). The result, of course, is a risk of substantial disuniformity in the interpretation of state and federal law, a risk underscored by the fact that "[t]ribal courts are often `subordinate to the political branches of tribal governments,' " Duro, at III There is one loose end. The panel majority in the Ninth Circuit held that "the presumption against tribal court jurisdiction does not apply in this case." Since we have held otherwise, should we now remand for application of the correct law? There is room for reasonable disagreement on this point, see post, at 396 (O'Connor, J., concurring in part and concurring in judgment), but on balance I think a remand is unnecessary. The Court's analysis of opposing state and tribal interests answers the opinion of the Ninth Circuit majority; in substance, the issues subject to the Court of Appeals's principal concern have been considered here. My own focus on the presumption was, of course, addressed by the panel (albeit unsympathetically), and the only question that *386 might now be considered by the Circuit on my separate approach to the case is the applicability of the second exception. But as Judge Rymer indicated in her dissent, the uncontested fact that the Tribal Court itself authorized service of the state warrant here bars any serious contention that the execution of that warrant adversely affected the Tribes' political integrity. See 1034. Thus, even if my alternative rationale exclusively governed the outcome, remand would be pure formality. |
Justice O'Connor | 1,987 | 14 | dissenting | Springfield v. Kibbe | https://www.courtlistener.com/opinion/111831/springfield-v-kibbe/ | We granted certiorari in this case to resolve whether a city can be held liable under 42 U.S. C. for providing inadequate police training, and, if so, what standard should govern the imposition of such liability. In my view, the question is properly before the Court, and I would decide it on the merits. I On the evening of September 28, 1981, the Springfield Police Department received a telephone call reporting that *261 someone had called an apartment's occupants and threatened to come after them with a knife. Later calls reported that an individual identified as Clinton Thurston had broken the apartment door and assaulted a woman staying at the apartment. When officers arrived at the scene, they discovered that Thurston had abducted the woman and driven away in his car. A short while later, Thurston's vehicle was spotted by an officer driving an unmarked police car. When Thurston stopped at an intersection, the officer walked up to Thurston's vehicle and identified himself as a police officer, but Thurston drove away. The officer gave chase, and soon was joined by other members of the Springfield Police Department. Two officers set up a roadblock to stop Thurston, but he drove past the obstacle without stopping. As he did so, one of the officers fired at the tires of Thurston's vehicle; later a nick was found in the left rear wheel. At a second roadblock, Officer Kenneth Schaub placed his vehicle across one lane of traffic, while he stood in the middle of the other lanes and attempted to flag down Thurston's automobile. Thurston again failed to stop. As Thurston passed the roadblock, Schaub fired in the direction of the car. Officer Theodore Perry, who had been waiting near the second roadblock on his motorcycle, heard Schaub's shot and joined the chase. Accelerating past several police cars, Perry pulled abreast of the rear window on the driver's side of Thurston's car. As he did so, Thurston swerved to the left, and Perry dropped back. Rather than remain behind the vehicle, Perry twice more moved up even with the car's rear window; on both occasions, when Thurston swerved towards him, Perry fired his gun. Apparently Perry hit Thurston in the head with the second shot; the car rolled to a stop and Thurston was taken, unconscious, to the hospital, where he died a short time later. Respondent, the administratrix of Thurston's estate, brought suit in the Federal District Court for the District of *262 Massachusetts under alleging that the city and several of its police officers had deprived Thurston of his civil rights. |
Justice O'Connor | 1,987 | 14 | dissenting | Springfield v. Kibbe | https://www.courtlistener.com/opinion/111831/springfield-v-kibbe/ | its police officers had deprived Thurston of his civil rights. After trial, the jury returned verdicts against the city and Officer Perry, but found in favor of the other officers. The jury awarded $1 in compensatory damages and $500 in punitive damages against Perry and $50,000 in compensatory damages against the city. The District Court denied the city's motions for directed verdict and for judgment notwithstanding the verdict. The city appealed the District Court's refusal to grant either a directed verdict or a judgment notwithstanding the verdict, and also claimed error in the jury charge. The Court of Appeals for the First Circuit affirmed. In showing that Thurston's injuries were inflicted pursuant to government "policy or custom" under respondent "argued primarily that the City should be found liable here because it had a policy or custom of inadequately training its officers." The Court of Appeals observed that while the plurality opinion in Oklahoma may "have raised doubts as to whether a harm allegedly caused by a policy of gross negligence in police training could meet 's standard of causation," the Court of Appeals "continue[d] to believe [that] this is a viable theory of municipal liability." The Court of Appeals found that while the evidence in the record regarding the Springfield Police Department's training policy admittedly was "sparse," the jury could have concluded from the testimony of two police officers that the city's training in the apprehension of fleeing vehicles was grossly inadequate. The jury also could infer, from the fact that both Schaub and Perry had used deadly force, that the city's failure to train its officers in alternative methods of stopping a fleeing vehicle played a substantial part in bringing about Thurston's death. The Court of Appeals identified a number of additional "policies" *263 or "customs" that the jury might have inferred from the evidence in this case. As the court noted, however, "these other policies were not proven sufficiently or linked sufficiently with the harm to impose municipal liability." Turning to the city's challenge to the jury instructions given in the case, the Court of Appeals noted that the city's argument was that its liability "could not be predicated upon an isolated incident of negligent training, but must instead be based on `a pattern of deliberate supervisory inaction and indifference.' " The Court of Appeals concluded that while the jury instructions "could have emphasized the distinction between negligence and reckless or grossly negligent conduct," the instructions were not deficient because they did inform the jury "that it must find a failure to train which amounted to gross negligence." |
Justice O'Connor | 1,987 | 14 | dissenting | Springfield v. Kibbe | https://www.courtlistener.com/opinion/111831/springfield-v-kibbe/ | find a failure to train which amounted to gross negligence." II The central question presented in this case is whether a city can be held liable under for the inadequate training of its employees. As the Court notes, fairly included is the related question whether more than simple or heightened negligence in training is required in order to establish such liability. See ante, at 258.[1] The Court of Appeals clearly reached and decided the negligence question, both in its consideration of the appeal from the jury charge, and in its review of the denial of the city's motions for directed verdict and for judgment notwithstanding the verdict. First, in addressing the city's challenge to the jury instructions, the Court of Appeals specifically considered whether the jury charge should have required a *264 showing of "deliberate supervisory inaction and indifference." See 777 F.2d, The Court of Appeals rejected the city's argument, concluding that the jury instructions were adequate because they "instructed the jury that it must find a failure to train which amounted to gross negligence." Today this Court holds that the city's challenge to the jury charge was not properly preserved on appeal because the city failed to make a timely objection to the instructions as required by Federal Rule of Civil Procedure 51. Ante, at 258-259. The Court of Appeals, however, did not treat the question as barred by Rule 51, perhaps because that argument was not pressed before it. See Brief for Plaintiff-Appellee in No. 85-1078 (CA1), pp. 21-24. In my view, this Court should not now decline, on that basis, to review the Court of Appeals' affirmance of the jury charge. Moreover, even if the Court treats the city as having waived its challenge to the jury charge, the failure to object to an instruction does not render the instruction the "law of the case" for purposes of appellate review of the denial of a directed verdict or judgment notwithstanding the verdict. See ; ; 9 C. Wright & A. Miller, Federal Practice and Procedure 2558 (1971). The city raised the negligence question in its motions for directed verdict and for judgment notwithstanding the verdict, arguing that it should not be held liable "even for its grossly negligent failure to train single police officers." App. 26, 41. In arguing that a "pattern" of police misconduct is necessary to establish municipal liability under the city relied on and In those cases, the courts required proof of a pattern of police misconduct on the ground that municipal liability under could not be imposed absent proof of the city's " |
Justice O'Connor | 1,987 | 14 | dissenting | Springfield v. Kibbe | https://www.courtlistener.com/opinion/111831/springfield-v-kibbe/ | could not be imposed absent proof of the city's " `tacit authorization' of or `deliberate indifference' to constitutional injuries." See *265 ; see also and 227-228. The Court of Appeals must have viewed the city's motions as raising the negligence question, because the court directly ruled on the issue. The Court of Appeals began by stating that it previously had recognized "grossly inadequate training" as a basis for imposing municipal liability. See The court acknowledged, however, that the decision in Oklahoma had "raised doubts as to whether a harm allegedly caused by a policy of gross negligence in police training could meet 's standard of causation." The Court of Appeals then cited a footnote in which states: "[I]t is open to question whether a policymaker's `gross negligence' in establishing police training practices could establish a `policy' that constitutes a `moving force' behind subsequent unconstitutional conduct, or whether a more conscious decision on the part of the policymaker would be required." n. 7 Notwithstanding the reservations expressed in the Court of Appeals "continue[d] to believe" that gross negligence in police training was "a viable theory of municipal liability" under The Court does not contend that the Court of Appeals failed to pass upon the negligence question. Instead, the Court finds, from its own review of the briefs filed in the court below, that the city did not argue for a higher standard in the Court of Appeals. Ante, at 258. Certainly it is fair to conclude from the city's briefs in the Court of Appeals that its position on the question of culpability was unclear: it argued at different points that the standard should be deliberate indifference, see Brief for Defendant-Appellant in No. 85-1078 (CA1), p. 15; recklessness or "gross, palpable, and culpable" negligence, ; or deliberate indifference or gross negligence, Perhaps the Court of Appeals might have been able to conclude from this that it did not have before it the question whether municipal liability *266 can be based on a finding of negligence. The court did not read the briefs in that fashion, however; instead it viewed the question as before it and proceeded to consider whether gross negligence or some "more conscious decision on the part of the policymaker," Oklahoma 24, n. 7, would be required to establish liability. Having done so, it is clear that there are no jurisdictional or prudential reasons why this Court should not review the Court of Appeals' decision. The standard we previously have employed is that we will not review a question not pressed or passed on by the courts below. See, |
Justice O'Connor | 1,987 | 14 | dissenting | Springfield v. Kibbe | https://www.courtlistener.com/opinion/111831/springfield-v-kibbe/ | not pressed or passed on by the courts below. See, e. g., ; ; Here, the Court of Appeals expressly ruled on the question, in an appropriate exercise of its appellate jurisdiction; it is therefore entirely proper in light of our precedents for the Court to reach the question on which it granted certiorari, and I would do so. III In the Court held that municipal liability under can be imposed only where the municipality itself "causes" the constitutional violation. The Monell Court reasoned that as originally enacted, imposed liability if a person "subjected, or caused to be subjected," another person to the deprivation of federally protected rights. By specifically imposing liability for the torts of another person if one "caused" the tort to be committed, the statutory language suggested that Congress "did not intend liability to attach where such causation was absent." The Monell Court found support for this conclusion in the legislative history of the Civil Rights Act of 1871, the precursor to The legislative history showed that Congress had rejected the "Sherman amendment," which would have imposed vicarious liability on municipalities for damage *267 caused by the "riotou[s] and tumultuou[s] assembl[y]" of private individuals within their borders, Cong. Globe, 42d Cong., 1st Sess., 749 (1871), on the ground that the amendment was of questionable constitutional validity. The Court determined that while the legislative history did not specifically address whether Congress intended to permit vicarious liability for the torts of municipal agents and employees, the same constitutional difficulties that Congress perceived when it rejected the Sherman amendment would apply to liability based on respondeat superior. The Monell Court concluded that Congress did not intend, in enacting that municipalities be held vicariously liable for the tortious conduct of their employees. It is only when the "execution of [the] government's policy or custom inflicts the injury" that the municipality may be held liable under Given the importance, under of distinguishing between direct and vicarious liability, the Court repeatedly has stressed the need to find a direct causal connection between municipal conduct and the constitutional deprivation. See, e. g., Oklahoma 24-825, n. 8 ; Polk In Monell itself, the policy at issue commanded the deprivation of constitutional rights. The causal link between the municipal policy and the constitutional violation therefore was readily apparent: no "evidence was needed other than a statement of the policy by the municipal corporation, and its exercise." Oklahoma 22-823. When the execution of municipal policy does not compel a constitutional violation, however, the causal connection between municipal policy and the deprivation of constitutional rights becomes more difficult |
Justice O'Connor | 1,987 | 14 | dissenting | Springfield v. Kibbe | https://www.courtlistener.com/opinion/111831/springfield-v-kibbe/ | policy and the deprivation of constitutional rights becomes more difficult to discern. In some sense, of course, almost any injury inflicted by a municipal agent or *268 employee ultimately can be traced to some municipal policy. Finding 's causation requirement satisfied by such a remote connection, however, would eviscerate Monell's distinction, based on the language and history of between vicarious liability and liability predicated on the municipality's own constitutional violations. The limits on municipal liability imposed by require more careful analysis, in each instance, of the municipal policy alleged in the case, and whether a jury reasonably could conclude that the city's conduct was the moving force in bringing about the constitutional violation. In this case, the causal connection between the municipal policy and the constitutional violation is an inherently tenuous one. Respondent does not contend that the city's police training program authorizes the use of deadly force in the apprehension of fleeing vehicles; rather, her argument is that the methods taught in the city's training program were "inadequate," and that if individual officers had received more complete training, they would have resorted to those alternative methods without engaging in the unconstitutional conduct. The difficulty with respondent's argument is that at the time of the officers' alleged misconduct, any number of other factors were also in operation that were equally likely to contribute or play a predominant part in bringing about the constitutional injury: the disposition of the individual officers, the extent of their experience with similar incidents, the actions of the other officers involved, and so forth. To conclude, in a particular instance, that omissions in a municipal training program constituted the "moving force" in bringing about the officer's unconstitutional conduct, notwithstanding the large number of intervening causes also at work up to the time of the constitutional harm, appears to be largely a matter of speculation and conjecture. Because of the remote causal connection between omissions in a police training program and affirmative misconduct by individual officers in a particular instance, in my view the *269 "inadequacy" of police training may serve as the basis for liability only where the failure to train amounts to a reckless disregard for or deliberate indifference to the rights of persons within the city's domain. The "causation" requirement of is a matter of statutory interpretation rather than of common tort law. Cf. (injury "too remote a consequence" of official conduct to impose liability under even if conduct "proximately caused" injury under state tort law). Analogy to traditional tort principles, however, shows that the law has been willing to trace more distant causation |
Justice O'Connor | 1,987 | 14 | dissenting | Springfield v. Kibbe | https://www.courtlistener.com/opinion/111831/springfield-v-kibbe/ | the law has been willing to trace more distant causation when there is a cognitive component to the defendant's fault than when the defendant's conduct results from simple or heightened negligence. See, e. g., Restatement (Second) of Torts 501, Comment a, p. 591 (1965) ("[A] jury may be permitted to find that a defendant's reckless misconduct bears a sufficient causal relation to a plaintiff's harm to make him liable, although were the defendant's conduct merely negligent, no such finding would be permissible"). See generally W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton should be permitted to find that the municipality's inadequate training "caused" the plaintiff's injury only if the inadequacy of the training amounts to deliberate indifference or reckless disregard for the consequences. Negligence in training alone is not sufficient to satisfy the causation requirement of A number of lower courts have recognized the need to show more than negligence before a deficient training policy can form the basis for municipal liability under phrasing the requisite degree of fault variously as "deliberate indifference" or gross negligence "amounting to deliberate indifference." See, e. g., ; 717 F. 2d, at 227 (so grossly negligent as to constitute "deliberate indifference"); Patzner v. Burkett, 779 F. 2d *270 1363, 1367 ("deliberate indifference" where training so grossly negligent "that police misconduct inevitably occurs"); 717 F. 2d, at 937, n. 6 (no showing that municipality "remain[ed] indifferent to" unwarranted injury). Indeed, the Court of Appeals for the First Circuit previously had adopted such a standard, requiring proof of gross negligence "amounting to deliberate indifference" before finding Monell liability. See In my view, these decisions properly reflect the need to show more than "negligence" in police training procedures before a jury should be permitted to find that the city's policy was a material element and substantial factor in bringing about the alleged deprivation of protected federal rights. In this case, there clearly was insufficient evidence to support a finding that the city's training policy was conducted with reckless disregard for the consequences or deliberate indifference to its citizens' constitutional rights. Because such a showing is necessary, in my view, to make out a claim that the city "subjected, or caused [Thurston] to be subjected," to a deprivation of his constitutional rights under the Court of Appeals for the First Circuit should have reversed the decision of the District Court and remanded for the entry of judgment on behalf of the city of Springfield. The plurality opinion in made clear that to establish municipal liability for a policy that is not itself unconstitutional, the |
Justice O'Connor | 1,987 | 14 | dissenting | Springfield v. Kibbe | https://www.courtlistener.com/opinion/111831/springfield-v-kibbe/ | liability for a policy that is not itself unconstitutional, the plaintiff must introduce evidence sufficient to establish the existence of the policy; evidence showing that the city was at fault for establishing the policy; and evidence establishing that the policy was the moving force in causing the constitutional harm. A plaintiff does not carry the burden of proving these elements merely by introducing evidence concerning the particular incident at issue: "where the policy relied upon is not itself unconstitutional, considerably more proof than the single incident will be necessary in every case to establish both the requisite fault on the part of the *271 municipality, and the causal connection between the `policy' and the constitutional deprivation." A different result would have been directly at odds with the need under to "prevent the imposition of municipal liability under circumstances where no wrong could be ascribed to municipal decisionmakers." 21. The Court of Appeals' analysis of "fault" in this case relies upon the kind of inference specifically rejected in The evidence introduced at trial showed that the city's officers were instructed in two techniques for apprehending fleeing suspects: they were told to stand in the street and put up their hands in a stopping motion; and to move up behind the vehicle while using lights and siren to signify that the suspect should pull over and stop. 777 F.2d, 07. They were taught not to set up obstacles that completely block the road. The Court of Appeals did not point to any evidence which would support the conclusion that these instructions deviated from accepted police practice. Instead, the court concluded that the jury could have inferred, from the chase itself, that "partial roadblocks were not an effective method of slowing down a suspect who was unwilling to stop," ibid.; that additional methods might have been successful in apprehending the fleeing vehicle;[2] and that the failure to instruct *272 in these additional methods constituted gross negligence on the part of the city. The chain of inferences drawn by the Court of Appeals directly conflicts with 's instruction that "considerably more proof than the single incident will be necessary in every case to establish the requisite fault on the part of the municipality." There was no evidence in the record, apart from the speculative inferences suggested by the Court of Appeals, from which jurors reasonably could conclude that the city's training in the apprehension of fleeing vehicles manifested recklessness or deliberate indifference. Respondent therefore failed to prove an essential element of her claim, and a directed verdict should have been entered in favor of |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | This case raises the question whether Oklahoma's sales tax on the full price of a ticket for bus travel from Oklahoma to another State is consistent with the Commerce Clause, U S Const, Art I, 8, cl 3 We hold that it is I Oklahoma taxes sales in the State of certain goods and services, including transportation for hire Okla Stat, Tit 68, 1354(1)(C) [1] The buyers of the taxable *18 goods and services pay the taxes, which must be collected and remitted to the State by sellers 1361 Respondent Jefferson Lines, Inc, is a corporation that provided bus services as a common carrier in Oklahoma from 1988 to 1990 Jefferson did not collect or remit the sales taxes for tickets it had sold in Oklahoma for bus travel from Oklahoma to other States, although it did collect and remit the taxes for all tickets ithad sold in Oklahoma for travel that originated and terminated within that State After Jefferson filed for bankruptcy protection on October 2, 1989, petitioner, Oklahoma Tax Commission, filed proof of claims in Bankruptcy Court for the uncollected taxes for tickets for interstate travel sold by Jefferson[2] Jefferson cited the Commerce Clause in objecting to the claims, and argued that the tax imposes an undue burden on interstate commerce by permitting Oklahoma to collect a percentage of the full purchase price of all tickets for interstate bus travel, even though some of that value derives from bus travel through other States The tax also presents the danger of multiple taxation, Jefferson claimed, because any other State through which a bus travels while providing the services sold in Oklahoma will be able to impose taxes of their own upon Jefferson or its passengers for use of the roads The Bankruptcy Court agreed with Jefferson, the District Court affirmed, and so did the United States Court of Appeals for the Eighth Circuit In re Jefferson Lines, Inc, 15 * The Court of Appeals held that Oklahoma's tax was not fairly apportioned, as required under the established test for the constitutionality of a state tax on interstate commerce See Complete Auto Transit, The Court of Appeals understood its holding to be compelled by our decision in Central Greyhound Lines, which held unconstitutional an unapportioned state tax on the gross receipts [3] of a company that sold tickets for interstate bus travel The Court of Appeals rejected the Commission's position that the sale of a bus ticket is a wholly local transaction justifying a sales tax on the ticket's full value in the State where it is sold, reasoning that |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | value in the State where it is sold, reasoning that such a tax is indistinguishable from the unapportioned tax on gross receipts from interstate travel struck down in Central 93 We granted certiorari, and now reverse II Despite the express grant to Congress of the power to "regulate Commerce among the several States," U S Const, Art I, 8, cl 3, we have consistently held this language to contain a further, negative command, known as the dormant Commerce Clause, prohibiting certain state taxation even when Congress has failed to legislate on the subject Quill ; Northwestern States Portland Cement ; H P Hood & Sons, ; cf (dictum) We have understood this construction to serve the Commerce Clause's purpose of *180 preventing a State from retreating into economic isolation or jeopardizing the welfare of the Nation as a whole, as it would do if it were free to place burdens on the flow of commerce across its borders that commerce wholly within those borders would not bear The provision thus "`reflect[s] a central concern of the Framers that was an immediate reason for calling the Constitutional Convention: the conviction that in order to succeed, the new Union would have to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederation' " Wardair Canada quoting (199); see also The Federalist Nos 42 (J Madison), (A Hamilton), 11 (A Hamilton) The command has been stated more easily than its object has been attained, however, and the Court's understanding of the dormant Commerce Clause has taken some turns In its early stages, see 1 J Hellerstein & W Hellerstein, State Taxation ¶¶ 405-408 (2d ed 1993) (hereinafter Hellerstein & Hellerstein); 2:9-2:16, the & held Court the view that interstate commerce was wholly immune from state taxation "in any form," 12 US 640, "even though the same amount of tax should be laid on [intrastate] commerce," 49 (188); see also Cooley v Board of Wardens of Port of Philadelphia ex rel Soc for Relief of Distressed Pilots, ; (182) This position gave way in time to a less uncompromising but formal approach, according to which, for example, the Court would invalidate a state tax levied on gross receipts from interstate commerce, New Jersey Bell Telephone ; or upon the & interstate "freight carried" in commerce, Case of the State *181 Freight Tax, 28 (183), but would allow a tax merely measured by gross receipts from interstate commerce as long as the tax was formally imposed upon franchises, 142 US 21 |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | the tax was formally imposed upon franchises, 142 US 21 or "`in lieu of all taxes upon [the taxpayer's] property,' " United States Express [4] See generally Lockhart, Gross Receipts Taxes on Interstate Transportation and Communication, 5 Harv L Rev 40, Dissenting from this formal approach in 192, Justice Stone remarked that it was "too mechanical, too uncertain in its application, and too remote from actualities, to be of value" Di 23 US 34, (192) In 1938, the old formalism began to give way with Justice Stone's opinion in Western Live which examined New Mexico's franchise tax, measured by gross receipts, as applied to receipts from outof-state advertisers in a journal produced by taxpayers in New Mexico but circulated both inside and outside the State Although the assessment could have been sustained solely on prior precedent, see ; Lockhart 66, and n 122, Justice Stone added a dash of the pragmatism that, with a brief interlude, has since become our aspiration in this quarter of the law The Court had no trouble rejecting the claim that the "mere formation of the contract between persons in different states" insulated the receipts from taxation, Western Live and it saw the business of "preparing, printing and publishing magazine advertising [as] peculiarly local" and therefore subject to taxation by the *182 State within which the business operated The more "vexed question," however, was one that today we would call a question of apportionment: whether the interstate circulation of the journal barred taxation of receipts from advertisements enhanced in value by the journal's wide dissemination After rebuffing any such challenge on the ground that the burden on interstate commerce was "too remote and too attenuated" in the light of analogous taxation of railroad property, Justice Stone provided an "added reason" for sustaining the tax: "So far as the value contributed to appellants' New Mexico business by circulation of the magazine interstate is taxed, it cannot again be taxed elsewhere any more than the value of railroad property taxed locally The tax is not one which in form or substance can be repeated by other states in such manner as to lay an added burden on the interstate distribution of the magazine" The Court explained that "[i]t was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases the cost of doing the business" Soon after Western Live the Court expressly rested the invalidation of an unapportioned gross receipts tax on the ground that it violated the prohibition against multiple |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | on the ground that it violated the prohibition against multiple taxation: "The vice of the statute as applied to receipts from interstate sales is that the tax includes in its measure, without apportionment, receipts derived from activities in interstate commerce; and that the exaction is of such a character that if lawful it may in substance be laid to the fullest extent by States in which the goods are sold as well as those in which they are manufactured" J D Adams Mfg 304 US 30, *183 See also Gwin, White & After a brief resurgence of the old absolutism that proscribed all taxation formally levied upon interstate commerce, see ; Spector Motor Service, the Court returned to Western Live `s multiple taxation rule in Northwestern States Portland Cement and we categorically abandoned the latter-day formalism when Complete Auto Transit, overruled Spector and Freeman In Complete Auto, a business engaged in transporting cars manufactured outside the taxing State to dealers within it challenged a franchise tax assessed equally on all gross income derived from transportation for hire within the State The taxpayer's challenge resting solely on the fact that the State had taxed the privilege of engaging in an interstate commercial activity was turned back, and in sustaining the tax, we explicitly returned to our prior decisions that "considered not the formal language of the tax statute but rather its practical effect, and have sustained a tax against Commerce Clause challenge when the tax is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State" 430 US, at Since then, we have often applied, and somewhat refined, what has come to be known as Complete Auto `s four-part test See, e g, ; D H ; Container of ; Commonwealth We apply its criteria to the tax before us today *184 III A It has long been settled that a sale of tangible goods has a sufficient nexus to the State in which the sale is consummated to be treated as a local transaction taxable by that State US 33 So, too, in addressing the interstate provision of services, we recently held that a State in which an interstate telephone call originates or terminates has the requisite Commerce Clause nexus to tax a customer's purchase of that call as long as the call is billed or charged to a service address, or paid by an addressee, within the taxing State Oklahoma's tax falls comfortably within these rules Oklahoma |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | taxing State Oklahoma's tax falls comfortably within these rules Oklahoma is where the ticket is purchased, and the service originates there These facts are enough for concluding that "[t]here is `nexus' aplenty here" See D H Indeed, the taxpayer does not deny Oklahoma's substantial nexus to the instate portion of the bus service, but rather argues that nexus to the State is insufficient as to the portion of travel outside its borders This point, however, goes to the second prong of Complete Auto, to which we turn B The difficult question in this case is whether the tax is properly apportioned within the meaning of the second prong of Complete Auto `s test, "the central purpose [of which] is to ensure that each State taxes only its fair share of an interstate transaction" -261 This principle of fair share is the lineal descendant of Western Live `s prohibition of multiple taxation, which is threatened whenever one State's act of overreaching combines with the possibility that another State will claim its fair share of the value taxed: the portion of value by which *185 one State exceeded its fair share would be taxed again by a State properly laying claim to it For over a decade now, we have assessed any threat of malapportionment by asking whether the tax is "internally consistent" and, if so, whether it is "externally consistent" as well See ; Container Internal consistency is preserved when the imposition of a tax identical to the one in question by every other State would add no burden to interstate commerce that intrastate commerce would not also bear This test asks nothing about the degree of economic reality reflected by the tax, but simply looks to the structure of the tax at issue to see whether its identical application by every State in the Union would place interstate commerce at a disadvantage as compared with commerce intrastate A failure of internal consistency shows as a matter of law that a State is attempting to take more than its fair share of taxes from the interstate transaction, since allowing such a tax in one State would place interstate commerce at the mercy of those remaining States that might impose an identical tax See Gwin, White & There is no failure of it in this case, however If every State were to impose a tax identical to Oklahoma's, that is, a tax on ticket sales within the State for travel originating there, no sale would be subject to more than one State's tax External consistency, on the other hand, looks not to |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | tax External consistency, on the other hand, looks not to the logical consequences of cloning, but to the economic justification for the State's claim upon the value taxed, to discover whether a State's tax reaches beyond that portion of value that is fairly attributable to economic activity within the taxing State See ; Container -10 Here, the threat of real multiple taxation (though not by literally identical statutes) may indicate a State's impermissible overreaching It is to this less tidy world of real taxation that we turn now, and at length *186 1 The very term "apportionment" tends to conjure up allocation by percentages, and where taxation of income from interstate business is in issue, apportionment disputes have often centered around specific formulas for slicing a taxable pie among several States in which the taxpayer's activities contributed to taxable value In Moorman Mfg 43 US 26 (198), for example, we considered whether Iowa could measure an interstate corporation's taxable income by attributing income to business within the State "`in that proportion which the gross sales made within the state bear to the total gross sales' " at 20 We held that it could In Container we decided whether California could constitutionally compute taxable income assignable to a multi jurisdictional enterprise's in-state activity by apportioning its combined business income according to a formula "based, in equal parts, on the proportion of [such] business' total payroll, property, and sales which are located in the taxing State" 463 US, at 10 Again, we held that it could Finally, in Central Greyhound, we held that New York's taxation of an interstate bus line's gross receipts was constitutionally limited to that portion reflecting miles traveled within the taxing jurisdictio34 US, at 663 In reviewing sales taxes for fair share, however, we have had to set a different course A sale of goods is most readily viewed as a discrete event facilitated by the laws and amenities of the place of sale, and the transaction itself does not readily reveal the extent to which completed or anticipated interstate activity affects the value on which a buyer is taxed We have therefore consistently approved taxation of sales without any division of the tax base among different States, and have instead held such taxes properly measurable by the gross charge for the purchase, regardless of any activity outside the taxing jurisdiction that might have preceded the sale or might occur in the future See, e g, *18 Such has been the rule even when the parties to a sales contract specifically contemplated interstate movement of the goods either |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | sales contract specifically contemplated interstate movement of the goods either immediately before, or after, the transfer of ownership See, e g, Wardair Canada ; State Tax Comm'n of Utah v Pacific States Cast Iron Pipe 32 US 605 (upholding tax on sale that contemplated purchaser's interstate shipment of goods immediately after sale) The sale, we held, was "an activity which is subject to the state taxing power" so long as taxation did not "discriminat[e]" against or "obstruc[t]" interstate commerce, U S, and we found a sufficient safeguard against the risk of impermissible multiple taxation of a sale in the fact that it was consummated in only one State As we put it in a necessary condition for imposing the tax was the occurrence of "a local activity, delivery of goods within the State upon their purchase for consumption" So conceived, a sales tax on coal, for example, could not be repeated by other States, for the same coal was not imagined ever to be delivered in two States at once Conversely, we held that a sales tax could not validly be imposed if the purchaser already had obtained title to the goods as they were shipped from outside the taxing State into the taxing State by common carrier McLeod v J E Dilworth 322 US 32 (19) The out-of-state seller in that case "was through selling" outside the taxing State 0 In other words, the very conception of the common sales tax on goods, operating on the transfer of ownership and possession at a particular time and place, insulated the buyer from any threat of further taxation of the transaction In deriving this rule covering taxation to a buyer on sales of goods we were not, of course, oblivious to the possibility of successive taxation of related events up and down the stream of commerce, and our cases are implicit with the understanding that the Commerce Clause does not forbid the *188 actual assessment of a succession of taxes by different States on distinct events as the same tangible object flows along Thus, it is a truism that a sales tax to the buyer does not preclude a tax to the seller upon the income earned from a sale, and there is no constitutional trouble inherent in the imposition of a sales tax in the State of delivery to the customer, even though the State of origin of the thing sold may have assessed a property or severance tax on it See U S, at 53; cf Commonwealth In light of this settled treatment of taxes on sales of goods |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | of this settled treatment of taxes on sales of goods and other successive taxes related through the stream of commerce, it is fair to say that because the taxable event of the consummated sale of goods has been found to be properly treated as unique, an internally consistent, conventional sales tax has long been held to be externally consistent as well 2 A sale of services can ordinarily be treated as a local state event just as readily as a sale of tangible goods can be located solely within the State of delivery Cf Although our decisional law on sales of services is less developed than on sales of goods, one category of cases dealing with taxation of gross sales receipts in the hands of a seller of services supports the view that the taxable event is wholly local Thus we have held that the entire gross receipts derived from sales of services to be performed wholly in one State are taxable by that State, notwithstanding that the contract for performance of the services has been entered into across state lines with customers who reside outside the taxing State Western Live So, too, as we have already noted, even where interstate circulation contributes to the value of magazine advertising purchased by the customer, we have held that the Commerce Clause does not preclude a tax on its full value by the State *189 of publication 258-259 And where the services are performed upon tangible items retrieved from and delivered to out-of-state customers, the business performing the services may be taxed on the full gross receipts from the services, because they were performed wholly within the taxing State Department of Treasury of Ind v IngramRichardson Mfg of Ind, Interstate activity may be essential to a substantial portion of the value of the services in the first case and essential to performance of the services in the second, but sales with at least partial performance in the taxing State justify that State's taxation of the transaction's entire gross receipts in the hands of the seller On the analogy sometimes drawn between sales and gross receipts taxes, see International Harvester v Department of Treasury, 34-348 (19); but see Norton v Department of Revenue of Ill, 53 there would be no reason to suppose that a different apportionment would be feasible or required when the tax falls not on the seller but on the buyer Cases on gross receipts from sales of services include one falling into quite a different category, however, and it is on this decision that the taxpayer relies for an |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | is on this decision that the taxpayer relies for an analogy said to control the resolution of the case before us In 1948, the Court decided Central Greyhound Lines, striking down New York's gross receipts tax on transportation services imposed without further apportionment on the total receipts from New York sales of bus services, almost half of which were actually provided by carriage through neighboring New Jersey and Pennsylvania The Court held the statute fatally flawed by the failure to apportion taxable receipts in the same proportions that miles traveled through the various States bore to the total The similarity of Central Greyhound to this case is, of course, striking, and on the assumption that the economic significance of a gross receipts tax is indistinguishable from a tax on sales the Court of Appeals held that a similar mileage *190 apportionment is required here, see -93, as the taxpayer now argues We, however, think that Central Greyhound provides the wrong analogy for answering the sales tax apportionment question here To be sure, the two cases involve the identical services, and apportionment by mileage per State is equally feasible in each But the two diverge crucially in the identity of the taxpayers and the consequent opportunities that are understood to exist for multiple taxation of the same taxpayer Central Greyhound did not rest simply on the mathematical and administrative feasibility of a mileage apportionment, but on the Court's express understanding that the seller-taxpayer was exposed to taxation by New Jersey and Pennsylvania on portions of the same receipts that New York was taxing in their entirety The Court thus understood the gross receipts tax to be simply a variety of tax on income, which was required to be apportioned to reflect the location of the various interstate activities by which it was earned This understanding is presumably the reason that the Central Greyhound Court said nothing about the arguably local character of the levy on the sales transaction[5] Instead, the Court heeded `s warning about "[p]rivilege taxes requiring a percentage of the gross receipts from interstate transportation," which "if sustained, could be imposed wherever the interstate activity occurs " U S, at 45-46, n 2 Here, in contrast, the tax falls on the buyer of the services, who is no more subject to double taxation on the sale of these services than the buyer of goods would be The taxable event comprises agreement, payment, and delivery of some of the services in the taxing State; no other State can claim to be the site of the same combination The economic activity |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | be the site of the same combination The economic activity represented by the receipt of the ticket for "consumption" in the form of commencement and partial provision of the *191 transportation thus closely resembles `s "delivery of goods within the State upon their purchase for consumption," especially given that full "consumption" or "use" of the purchased goods within the taxing State has never been a condition for taxing a sale of those goods Although the taxpayer seeks to discount these resemblances by arguing that sale does not occur until delivery is made, nothing in our case law supports the view that when delivery is made by services provided over time and through space a separate sale occurs at each moment of delivery, or when each State's segment of transportation State by State is complete The analysis should not lose touch with the common understanding of a sale, see 488 U S, ; the combined events of payment for a ticket and its delivery for present commencement of a trip are commonly understood to suffice for a sale In sum, the sales taxation here is not open to the double taxation analysis on which Central Greyhound turned, and that decision does not control Before we classify the Oklahoma tax with standard taxes on sales of goods, and with the taxes on less complicated sales of services, however, two questions may helpfully be considered 3 Although the sale with partial delivery cannot be duplicated as a taxable event in any other State, and multiple taxation under an identical tax is thus precluded, is there a possibility of successive taxation so closely related to the transaction as to indicate potential unfairness of Oklahoma's tax on the full amount of sale? And if the answer to that question is no, is the very possibility of apportioning by mileage a sufficient reason to conclude that the tax exceeds the fair share of the State of sale? a The taxpayer argues that anything but a Central Greyhound mileage apportionment by State will expose it to the *192 same threat of multiple taxation assumed to exist in that case: further taxation, that is, of some portion of the value already taxed, though not under a statute in every respect identical to Oklahoma's But the claim does not hold up The taxpayer has failed to raise any specter of successive taxes that might require us to reconsider whether an internally consistent tax on sales of services could fail the external consistency test for lack of further apportionment (a result that no sales tax has ever suffered under our |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | result that no sales tax has ever suffered under our cases) If, for example, in the face of Oklahoma's sales tax, Texas were to levy a sustainable, apportioned gross receipts tax on the Texas portion of travel from Oklahoma City to Dallas, interstate travel would not be exposed to multiple taxation in any sense different from coal for which the producer may be taxed first at point of severance by Montana and the customer may later be taxed upon its purchase in New York The multiple taxation placed upon interstate commerce by such a confluence of taxes is not a structural evil that flows from either tax individually, but it is rather the "accidental incident of interstate commerce being subject to two different taxing jurisdictions" Lockhart 5; See Moorman Mfg 43 U S, at 2[6] *193 Nor has the taxpayer made out a case that Oklahoma's sales tax exposes any buyer of a ticket in Oklahoma for travel into another State to multiple taxation from taxes imposed upon passengers by other States of passage Since a use tax, or some equivalent on the consumption of services, is generally levied to compensate the taxing State for its *194 incapacity to reach the corresponding sale, it is commonly paired with a sales tax, see, e g, D H 486 U S, at 31; Boston Exchange v State Tax Comm'n, 429 US 318, ; Henneford v Silas Mason 300 US 5 (193), being applicable only when no sales tax has been paid or subject to a credit for any such tax paid Since any use tax would have to comply with Commerce Clause requirements, the tax scheme could not apply differently to goods and services purchased out of state from those purchased domestically Presumably, then, it would not apply when another State's sales tax had previously been paid, or would apply subject to credit for such payment In either event, the Oklahoma ticket purchaser would be free from multiple taxation True, it is not Oklahoma that has offered to provide a credit for related taxes paid elsewhere, but in taxing sales Oklahoma may rely upon use-taxing States to do so This is merely a practical consequence of the structure of use taxes as generally based upon the primacy of taxes on sales, in that use of goods is taxed only to the extent that their prior sale has escaped taxation Indeed the District of Columbia and of the 45 States that impose sales and use taxes permit such a credit or exemption for similar taxes paid to other States See 2 Hellerstein & |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | similar taxes paid to other States See 2 Hellerstein & Hellerstein ¶ 1808, p 18-48; 1 All States Tax Guide ¶ 256 As one state court summarized the provisions in force: "These credit provisions create a national system under which the first state of purchase or use imposes the tax Thereafter, no other state taxes the transaction unless there has been no prior tax imposed or if the tax rate of the prior taxing state is less, in which case the subsequent taxing state imposes a tax measured only by the differential rate" KSS Transportation v Baldwin, 9 N J Tax 23, 285 (198) *195 The case of threatened multiple taxation where a sales tax is followed by a use tax is thus distinguishable from the case of simultaneous sales taxes considered in where we were reassured to some degree by the provision of a credit in the disputed tax itself for similar taxes placed upon the taxpayer by other States See 488 U S, at 264 In that case, unlike the sales and use schemes posited for the sake of argument here, each of the competing sales taxes would presumably have laid an equal claim on the taxpayer's purse b Finally, Jefferson points to the fact that in this case, unlike the telephone communication tax at issue in Oklahoma could feasibly apportion its sales tax on the basis of mileage as we required New York's gross receipts tax to do in Central Although indeed noted that "[a]n apportionment formula based on mileage or some other geographic division of individual telephone calls would produce insurmountable administrative and technological barriers," 488 US, at 264-265, and although we agree that no comparable barriers exist here, we nonetheless reject the idea that a particular apportionment formula must be used simply because it would be possible to use it We have never required that any particular apportionment formula or method be used, and when a State has chosen one, an objecting taxpayer has the burden to demonstrate by "`clear and cogent evidence,' " that "`the income attributed to the State is in fact out of all appropriate proportions to the business transacted in that State, or has led to a grossly distorted result' " Container 463 U S, at 10, quoting Moorman Mfg 43 U S, at 24 That is too much for Jefferson *196 to bear in this case It fails to show that Oklahoma's tax on the sale of transportation imputes economic activity to the State of sale in any way substantially different from that imputed by the garden-variety sales tax, which |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | different from that imputed by the garden-variety sales tax, which we have perennially sustained, even though levied on goods that have traveled in interstate commerce to the point of sale or that will move across state lines thereafter See, e g, Wardair Canada ; US 33 ; State Tax Comm'n of Utah v Pacific States Cast Iron Pipe 32 US 605 ; see also Western Live 303 U S, ; 488 U S, (upholding tax upon the purchase of an interstate telephone call which had "many of the characteristics of a sales tax [e]ven though such a retail purchase is not a purely local event since it triggers simultaneous activity in several States") Nor does Oklahoma's tax raise any greater threat of multiple taxation than those sales taxes that have passed muster time and again There is thus no reason to leave the line of long standing precedent and lose the simplicity of our general rule sustaining sales taxes measured by full value, simply to carve out an exception for the sub category of sales of interstate transportation services We accordingly conclude that Oklahoma's tax on ticket sales for travel originating in Oklahoma is externally consistent, as reaching only the activity taking place within the taxing State, that is, the sale of the service Cf -262; Container -10[] *19 C We now turn to the remaining two portions of Complete Auto `s test, which require that the tax must "not discriminate against interstate commerce," and must be "fairly related to the services provided by the State" 430 US, at Oklahoma's tax meets these demands A State may not "impose a tax which discriminates against interstate commerce by providing a direct commercial advantage to local business" Northwestern States Portland Cement 358 U S, at ; see also American Trucking Assns, Inc v 483 US 266, (198) Thus, States are barred from discriminating against foreign enterprises competing with local businesses, see, e g, and from discriminating against commercial activity occurring outside the taxing State, see, e g, Boston Exchange v State Tax Comm'n, 429 US 318 No argument has been made that Oklahoma discriminates *198 against out-of-state enterprises, and there is no merit in the argument that the tax discriminates against interstate activity The argument proffered by Jefferson and amicus Greyhound Lines is largely a rewriting of the apportionment challenge rejected above, and our response needs no reiteration here See Brief for Respondent 40; Brief for Greyhound Lines, Inc, as Amicus Curiae 20-2 Jefferson takes the additional position, however, that Oklahoma discriminates against out-of-state travel by taxing a ticket "at the full |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | against out-of-state travel by taxing a ticket "at the full 4% rate" regardless of whether the ticket relates to "a route entirely within Oklahoma" or to travel "only 10 percent within Oklahoma" Brief for Respondent 40 In making the same point, amicus Greyhound invokes our decision in which struck down Pennsylvania's flat tax on all trucks traveling in and through the State as "plainly discriminatory" 483 US, But that case is not on point In we held that a flat tax on trucks for the privilege of using Pennsylvania's roads discriminated against interstate travel, by imposing a cost per mile upon out-of-state trucks far exceeding the cost per mile borne by local trucks that generally traveled more miles on Pennsylvania roads The tax here differs from the one in however, by being imposed not upon the use of the State's roads, but upon "the freedom of purchase" McLeod v J E Dilworth 322 U S, 0 However complementary the goals of sales and use taxes may be, the taxable event for one is the sale of the service, not the buyer's enjoyment or the privilege of using Oklahoma's roads Since Oklahoma facilitates purchases of the services equally for intrastate and interstate travelers, all buyers pay tax at the same rate on the value of their purchases See D H 486 U S, at 32; cf ("[T]he amount of Pennsylvania's taxes owed by a trucker does not vary directly with some proxy for value obtained from the State") Thus, even if dividing Oklahoma sales taxes by *199 in-state miles to be traveled produces on average a higher figure when interstate trips are sold than when the sale is of a wholly domestic journey, there is no discrimination against interstate travel; miles traveled within the State simply are not a relevant proxy for the benefit conferred upon the parties to a sales transaction As with a tax on the sale of tangible goods, the potential for interstate movement after the sale has no bearing on the reason for the sales tax See, e g, Wardair Canada ; cf Commonwealth 453 U S, at 61-619 Only Oklahoma can tax a sale of transportation to begin in that State, and it imposes the same duty on equally valued purchases regardless of whether the purchase prompts interstate or only intrastate movement There is no discrimination against interstate commerce D Finally, the Commerce Clause demands a fair relation between a tax and the benefits conferred upon the taxpayer by the State See 488 U S, at 266-26; D H ; Commonwealth The taxpayer argues that the |
Justice Souter | 1,995 | 20 | majority | Oklahoma Tax Comm'n v. Jefferson Lines, Inc. | https://www.courtlistener.com/opinion/117914/oklahoma-tax-commn-v-jefferson-lines-inc/ | 266-26; D H ; Commonwealth The taxpayer argues that the tax fails this final prong because the buyer's only benefits from the taxing State occur during the portion of the journey that takes place in Oklahoma The taxpayer misunderstands the import of this last requirement The fair relation prong of Complete Auto requires no detailed accounting of the services provided to the taxpayer on account of the activity being taxed, nor, indeed, is a State limited to offsetting the public costs created by the taxed activity If the event is taxable, the proceeds from the tax may ordinarily be used for purposes unrelated to the taxable event Interstate commerce may thus be made to pay its fair share of state expenses and "`contribute to the cost of providing all governmental services, including those services *200 from which it arguably receives no direct "benefit"` " at 26, quoting Commonwealth at 62, n 16 The bus terminal may not catch fire during the sale, and no robbery there may be foiled while the buyer is getting his ticket, but police and fire protection, along with the usual and usually forgotten advantages conferred by the State's maintenance of a civilized society, are justifications enough for the imposition of a tax See at 26 Complete Auto `s fourth criterion asks only that the measure of the tax be reasonably related to the taxpayer's presence or activities in the State See Commonwealth What we have already said shows that demand to be satisfied here The tax falls on the sale that takes place wholly inside Oklahoma and is measured by the value of the service purchased IV Oklahoma's tax on the sale of transportation services does not contravene the Commerce Clause The judgment of the Court of Appeals is reversed, accordingly, and the case is remanded for further proceedings consistent with this opinion It is so ordered Justice Scalia, with whom Justice Thomas joins, concurring in the judgment |
Justice Scalia | 1,990 | 9 | dissenting | Hoffmann-La Roche Inc. v. Sperling | https://www.courtlistener.com/opinion/112345/hoffmann-la-roche-inc-v-sperling/ | The Court holds that in a 216(b) action the district court can use its compulsory process to assist counsel for the plaintiff in locating nonparties to the litigation who may have similar claims, and in obtaining their consent to his prosecution of those claims. Because I know of no source of authority for such an extraordinary exercise of the federal judicial power, I dissent. To read the Court's opinion, one would think that what is at issue here is nothing but a routine exercise in case management. We are told that the district court has a "managerial responsibility to oversee the joinder of additional parties" in 216(b) actions, ante, at 171, in order to protect potential plaintiffs and avoid duplicative litigatio We are told that all concerned plaintiffs, defendants, and the judicial system itself benefit when the district courts abandon their "passiv[e]" stance and instead undertake "early judicial intervention" in the process of identifying people who have a cause of action and securing their consent to join the litigatio Ante, at 171-172. And we are told that by doing good in this fashion the district courts merely avail themselves of their "considerable authority `to manage their own affairs so as to *175 achieve the orderly and expeditious disposition of cases.' " Ante, at 172-173 ). The difficulty with sweeping these orders under the rug of "case management" is that they were not at all designed to facilitate the adjudication of any claim before the court. The individuals whom the court helped notify were not, at the time of the orders, part of the case. Section 216(b) provides that "[n]o employee shall be a party plaintiff unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought." 29 U.S. C. 216(b) (1982 ed.). It is true, of course, that the orders can be regarded as managing future cases assuring, to the extent the plaintiffs are willing, that such cases will not be filed in different courts and at different times. But that does not make this court's handling of the case before it any simpler or more efficient. Surely the judge's authority to "manage" cases has never before been thought to be more expansive than his authority to adjudicate them i. e., to extend to cases that have not actually been filed in his court. The activity approved today is an extraordinary application of the federal judicial power, which is limited by Article III of the Constitution to the adjudication of cases |
Justice Scalia | 1,990 | 9 | dissenting | Hoffmann-La Roche Inc. v. Sperling | https://www.courtlistener.com/opinion/112345/hoffmann-la-roche-inc-v-sperling/ | Article III of the Constitution to the adjudication of cases and controversies. See, e. g., ; ; United ; Hayburn's Case, The meaning of the "case or controversy" requirement was elucidated by Chief Justice Marshall many years ago: "This clause [Art. III, 2, cl. 1] enables the judicial department to receive jurisdiction to the full extent of the constitution, laws, and treaties of the United States, when any question respecting them shall assume such a form that the judicial power is capable of acting on it. That power is capable of acting only when the subject is submitted to it by a party who asserts his rights in the *176 form prescribed by law. It then becomes a case." The claims facilitated or "managed" here had not yet been submitted to the District Court. No one doubts, of course, that Congress could give an executive agency authority to compel disclosure of prior employees' names, so that the agency might invite them to join an existing suit or provide their names to counsel. But giving a court authority to take action directed, not to the resolution of the dispute before it, but to the generation and management of other disputes, is, if not unconstitutional, at least so out of accord with age-old practices that surely it should not be assumed unless it has been clearly conferred. Yet one searches the Court's opinion in vain for any explicit statutory command that federal courts assume this novel role. First, nothing in 216(b) itself confers this power. The portion of the statute dealing with collective employee actions provides that employees may sue in a representative capacity for other similarly situated employees who have consented to the representatio The Court characterizes this as an "affirmative permission" for representative actions, from which it derives a "grant [of] the requisite procedural authority to manage the process of joining multiple parties." Ante, at 170 Of course the reality of the matter is that it is not an "affirmative permission" for representative actions at all, but rather a limitation upon the affirmative permission for representative actions that already exists in Rule 23 of the Federal Rules of Civil Procedure. (That is to say, were it not for this provision of 216(b) the representative action could be brought even without the prior consent of similarly situated employees.) But accepting the notion that it is an "affirmative permission" for representative actions, I do not see how that converts into an implied authorization for courts to undertake the unheard-of role of midwifing those actions. I have no doubt *177 that courts possess |
Justice Scalia | 1,990 | 9 | dissenting | Hoffmann-La Roche Inc. v. Sperling | https://www.courtlistener.com/opinion/112345/hoffmann-la-roche-inc-v-sperling/ | those actions. I have no doubt *177 that courts possess certain powers over the 216(b) joinder process, most prominently the power to satisfy themselves that the employees who purportedly become parties are in fact similarly situated to the representative, and have in fact given valid consents to the litigatio That is simply part of the courts' ever-present duty to inquire into their jurisdiction over claims brought before them. But to reason from that to the existence of a more general "procedural authority to manage the process of joining multiple parties" seems to me fallacious. Nothing in 216(b) remotely confers the extraordinary authority for a court either directly or by lending its judicial power to the efforts of a party's counsel to search out potential claimants, ensure that they are accurately informed of the litigation, and inquire whether they would like to bring their claims before the court. The Court seeks to minimize the novelty of the authority it confers by analogizing it to the authority we have earlier acknowledged for district courts to regulate communications between class members and their representatives in Rule 23 class actions, in order to ensure that the former are kept accurately informed of the litigatio See Gulf Oil There is no compariso In Rule 23 class actions, the members of a class which qualifies for certification are parties to the action and will be bound by the judgment (except for those members of a 23(b)(3) class who elect to opt out). See Fed. Rule Civ. Proc. 23(c)(3). It is not at all extraordinary for courts to supervise and regulate the participation of existing parties in actions that are pending. The Rules specifically provide, for example, that courts may, and in some instances must, notify absent class members of the pendency of the litigatio See Fed. Rule Civ. Proc. 23(c)(2) (requiring court in 23(b)(3) action to notify absent class members that they will be bound by judgment unless they opt out by a certain date); Fed. Rule Civ. Proc. 23(d) (authorizing court in 23(b)(1) or (b)(2) actions to notify class members of pendency of litigation). But what courts *178 may do with respect to absent parties says nothing about what they may do with respect to members of the public at large. Nor do I agree with the Court that the Federal Rules Of Civil Procedure themselves provide the authority claimed by the District Court. To begin with, authorization from that source may be expressly foreclosed by Rule 82, which provides that the Rules "shall not be construed to extend or limit the jurisdiction |
Justice Scalia | 1,990 | 9 | dissenting | Hoffmann-La Roche Inc. v. Sperling | https://www.courtlistener.com/opinion/112345/hoffmann-la-roche-inc-v-sperling/ | "shall not be construed to extend or limit the jurisdiction of the United States district courts or the venue of actions therei" Authority for the courts to use their power for a purpose that neither achieves nor assists the resolution of claims before them appears to violate that prohibition and the urgings of judicial efficiency are no justification for ignoring it. Cf. 553, 6 ; Owen Equipment & Erection But even if the Federal Rules could expand judicial power in this fashion, nothing in their language suggests that they have done so. The Court relies upon Rule 16, which, in authorizing pretrial conferences to facilitate the disposition of cases, admonishes the court to address "the need for adopting special procedures for managing potentially difficult or protracted actions that may involve complex issues, multiple parties, difficult legal questions, or unusual proof problems." Fed. Rule Civ. Proc. 16(c)(10). It would certainly be strange to confer an unusual new power by simply mentioning that power (as one of the subjects that can be considered) in a provision designed to authorize pretrial conferences. But in any case, the authority to "manage actions" cannot reasonably be read to refer to the management of claims and *179 parties not before the court. This is made entirely clear by the Rule's catchall provision, which admonishes the court to address "such other matters as may aid in the disposition of the actio" Fed. Rule Civ. Proc. 16(c)(11) The Court's repeated reliance upon Rule 83 is so strained that it snaps. Rule 83 states; "In all cases not provided for by rule, the district judges may regulate their practice in any manner not inconsistent with these rules or those of the district in which they act." The contention here is that this is not a "regulation of practice" pertinent to resolution of the controversy before the court. To respond to that contention by pointing out that the court has been given authority to "regulate practice" is not to respond at all unless the Court means that "regulating practice" includes impositions upon the parties and their counsel for any purpose whatever. In addition to being void because of lack of authority to act for a purpose unrelated to adjudication of the case before it, one of the court's orders, the discovery order, was invalid because the purpose for which it was issued was not a purpose permitted by Rule 26. Rule 26(b), entitled "Discovery Scope and Limits," provides: "Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows: |
Justice Scalia | 1,990 | 9 | dissenting | Hoffmann-La Roche Inc. v. Sperling | https://www.courtlistener.com/opinion/112345/hoffmann-la-roche-inc-v-sperling/ | with these rules, the scope of discovery is as follows: "(1) Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably *180 calculated to lead to the discovery of admissible evidence." (Emphasis added.) The discovery order here had nothing to do with "the subject matter involved in the pending action," in the plainly intended sense of constituting, or "lead[ing] to the discovery of," admissible evidence. To the contrary, it was entered by the District Court solely to "facilitate notice of an ADEA suit to absent class members," 118 F. R. D. 392, 402 and was sustained by the Third Circuit as an exercise of "the authority of the district court in an ADEA action to facilitate joinder of the putative class members," Discovery for that purpose is simply not authorized. The Court notes casually that it does not "paus[e] to explore alternative bases for the discovery, for instance that the employees might have knowledge of other discoverable matter." Ante, at 170. I suggest that those are not "alternative bases for the discovery," but the only permissible bases for discovery. And the speculation that they "might" exist will not support affirmance of an order that was squarely based on another ground. Thus, to reach its disposition the Court not only bends traditionally understood case-or-controversy limitations but invents a discovery power beyond what the Rules confer. In the end, the only serious justification for today's decision is that it makes for more efficient and economical adjudication of cases not more efficient and economical adjudication of the pending case, but of other cases that might later be filed separately on behalf of plaintiffs who would have been perfectly willing to join the present suit instead. I concede that this justification, at least, is entirely valid. The problem is that it is a justification in policy but not in law. If the benefits of judicial efficiency and economy constitute sufficient warrant for the District Court's action, then one can imagine numerous areas in which district courts should similarly take on the function of litigation touts whenever, |
Justice Scalia | 1,990 | 9 | dissenting | Hoffmann-La Roche Inc. v. Sperling | https://www.courtlistener.com/opinion/112345/hoffmann-la-roche-inc-v-sperling/ | similarly take on the function of litigation touts whenever, in fact, they have before them a claim that is similar to claims *181 which other identifiable individuals might possess. The Court's suggestion that ADEA suits are rendered distinctive by 216(b)'s "explicit statutory direction of a single ADEA action for multiple ADEA plaintiffs," ante, at 172, is entirely unpersuasive. Section 216 no more directs a single action in ADEA litigation than Rule 20 (permissive joinder) directs a single action in all other litigatio Both provisions permit (in the words of Rule 20) that persons may "join in one action as plaintiffs [who] assert [a] right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all these persons will arise in the actio" Fed. Rule Civ. Proc. 20(a). There is more than a little historical irony in the Court's decision today. "Stirring up litigation" was once exclusively the occupation of disreputable lawyers, roundly condemned by this and all American courts. See, e. g., ; But in the age of the "case managing" judicial bureaucracy, our perceptions have changed. Seeking out and notifying sleeping potential plaintiffs yields such economies of scale that what was once demeaned as a drain on judicial resources is now praised as a cutting-edge tool of efficient judicial administratio Perhaps it is. But that does not justify our taking it in hand when Congress has not authorized it. Even less does it justify our rush to abandon (not only without compulsion but without invitation) what the Court deprecatingly calls the courts' "passive" role in determining which claims come before them, but which I regard as one of the natural components of a system in which courts are not inquisitors of justice but arbiters of adversarial claims. I respectfully dissent. |
Justice Stevens | 1,993 | 16 | dissenting | Smith v. United States | https://www.courtlistener.com/opinion/112827/smith-v-united-states/ | In my opinion the Court's decision to grant certiorari in this case was a wise exercise of its discretion. The question whether the United States should be held responsible for the tortious conduct of its agents in the vast "sovereignless region" of Antarctica, ante, at 198, is profoundly important, not only because its answer identifies the character of our concern about ordinary justice, but also because Antarctica is just one of three vast sovereignless places where the negligence of federal agents may cause death or physical injury. The negligence that is alleged in this case will surely have its parallels in outer space as our astronauts continue their explorations of ungoverned regions far beyond the jurisdictional boundaries that were familiar to the Congress that enacted the Federal Tort Claims Act (FTCA) in 194. Moreover, our jurisprudence relating to negligence of federal agents on the sovereignless high seas points unerringly to the correct disposition of this case. Unfortunately, the Court has ignored that jurisprudence in its parsimonious construction of the FTCA's "sweeping" waiver of sovereign immunity.[1] In theory the territorial limits on the consent to sue the United States for the torts of its agents might be defined in four ways: (1) there is no such limit; (2) territory subject to *20 the jurisdiction of a foreign country is the only exclusion; (3) it also excludes sovereignless land areas such as Antarctica, but it includes the high seas and outer space; or (4) it has an "exclusive domestic focus" that applies "only within the territorial jurisdiction of the United States."[2] The "foreign country" exclusion in 28 U.S. C. 280(k)[3] unquestionably eliminates the first possibility. In my opinion, the second is compelled by the text of the Act.[4] The third possibility is not expressly rejected by the Court, but the reasoning in its terse opinion seems more consistent with the Government's unambiguous adoption of the fourth, and narrowest, interpretation. I shall therefore first explain why the text of the FTCA unquestionably requires rejection of the Government's submission. I The FTCA includes both a broad grant of jurisdiction to the federal courts in 1(b)[5] and a broad waiver of sovereign *207 immunity in 274.[] Neither of these sections identifies any territorial limit on the coverage of the Act. That Congress intended and understood the broad language of those two provisions to extend beyond the territory of the United States is demonstrated by its enactment of two express exceptions from that coverage that would have been unnecessary if the initial grant of jurisdiction and waiver of immunity had been as narrow as the Government |
Justice Stevens | 1,993 | 16 | dissenting | Smith v. United States | https://www.courtlistener.com/opinion/112827/smith-v-united-states/ | waiver of immunity had been as narrow as the Government contends. One of those, of course, is the "foreign country" exclusion in 280(k). See n. The other is the exclusion in 280(d) for claims asserted under the Suits in Admiralty Act or the Public Vessels Act.[7] Without that exclusion, a party with a claim against the United States cognizable under either of those venerable statutes would have had the right to elect the pre-existing remedy or the newly enacted FTCA remedy. Quite obviously that exclusion would have been unnecessary if the FTCA waiver did not extend to the sovereignless expanses of the high seas. Indeed, it was the enactment of the FTCA in 194 that first subjected the United States to liability for maritime negligence claims that could not be maintained under either the Suits in Admiralty Act or the Public Vessels Act,[8] in particular, claims arising from death or injury on the high seas. *208 As enacted in 1920, the Death on the High Seas Act (DOHSA) provided a remedy against private parties but contained no waiver of sovereign immunity.[9] That changed with the enactment of the FTCA, which waived the sovereign immunity of the United States for claims arising on the high seas under the DOHSA and the general maritime law. See, e. g., United (CA5 190) cert. denied, U.S. 933 (191); 44-447 (ED Pa. 190) aff'd, 30 F.2d 1 (CA3 192); (SD Cal. 195) ; See also 80 F.2d 5, ; 525 52 (noting that prior to 190 amendments to Suits in Admiralty Act, FTCA waived sovereign immunity for claims under the general maritime law and the DOHSA). In 190, Congress amended the Suits in Admiralty Act so as to bring all maritime torts asserted against the United States, including those arising under the DOHSA, within the purview of the Suits in Admiralty Act and thus outside the waiver of sovereign immunity in the FTCA. See United 425 U.S. 14, 17, n. 14 (197). There can be no disputing the fact, however, that at the time it was enacted, the FTCA waiver extended to the sovereignless reaches of the high seas. Since the geographic scope of that waiver has never been amended, the * Government's submission that it is confined to territory under the jurisdiction of the United States is simply untenable. That the 79th Congress intended the waiver of sovereign immunity in the FTCA to extend to the high seas does not, of course, answer the question whether that waiver extends to the sovereignless region of Antarctica. It does, however, undermine one premise of the Court's |
Justice Stevens | 1,993 | 16 | dissenting | Smith v. United States | https://www.courtlistener.com/opinion/112827/smith-v-united-states/ | Antarctica. It does, however, undermine one premise of the Court's analysis: that the presumption against the extraterritorial application of federal statutes supports its narrow construction of the geographic reach of the FTCA. As the Court itself acknowledges, see ante, at 204, that presumption operates "unless a contrary intent appears." Here, the contrary intent is unmistakable. The same Congress that enacted the "foreign country" exception to the broad waiver of sovereign immunity in 274 subjected the United States to claims for wrongful death and injury arising well beyond the territorial jurisdiction of the United States. The presumption against extraterritorial application of federal statutes simply has no bearing on this case. II The Government, therefore, may not prevail unless Antarctica is a "foreign country" within the meaning of the exception in subsection (k). Properly, in my view, the Court inquires as to how we are to construe this exception to the FTCA's waiver of sovereign immunity. Ante, at 203. Instead of answering that question, however, the Court cites a nebulous statement in United and simply asserts that construing the foreign-country exception so as to deny recovery to this petitioner somehow accords with congressional intent. Ante, at 203. I had thought that canons of statutory construction were tools to be used to divine congressional intent, not empty phrases used to ratify whatever result is desired in a particular case. In any event, I would answer the question that *210 the Court poses, but then ignores. And as I read our cases, the answer is clear: Exceptions to the "`sweeping' " waiver of sovereign immunity in the FTCA should be, and have been, "narrowly construed." United ).[10] Accordingly, given a choice between two acceptable interpretations of the term "country"it may designate either a sovereign nation or an expanse of landit is our duty to adopt the former. Even without that rule of construction, we should favor the interpretation of the term that the Court has previously endorsed. Referring specifically to the term as used in the FTCA, we stated: "We know of no more accurate phrase in common English usage than `foreign country' to denote territory subject to the sovereignty of another nation." United That interpretation is consistent with a statutory scheme that imposes tort liability on the Government "in the same manner and to the same extent as a private individual under like circumstances," see n. As we explained in Spelar: "[T]hough Congress was ready to lay aside a great portion of the sovereign's ancient and unquestioned immunity from suit, it was unwilling to subject the United States to liabilities depending upon the |
Justice Stevens | 1,993 | 16 | dissenting | Smith v. United States | https://www.courtlistener.com/opinion/112827/smith-v-united-states/ | to subject the United States to liabilities depending upon the laws of a foreign power." Thus, the narrow interpretation of the term "foreign *211 country" is precisely tailored to make the scope of the subsection (k) exception coextensive with its justification. III The Court seeks to buttress its interpretation of the "foreign country" exception by returning to the language of the jurisdictional grant in 1(b). As I have noted, federal courts have jurisdiction of civil claims against the United States "for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred."[11] Emphasizing the last dozen words, the Court essentially argues that Antarctica is "a place that has no law" and therefore it would be "bizarre" to predicate federal liability on its governing law. Ante, at 202.[12] Although the words the Court has italicized indicate that Congress may not have actually thought about sovereignless regions, they surely do not support the Court's conclusion. *212 Those words, in conjunction with 274, require an answer to the question whether a private defendant, in like circumstances, would be liable to the complainant. The Court fails even to ask that question, possibly because it is so obvious that petitioner could maintain a cause of action against a private party whose negligence caused her husband's death in Antarctica. It is simply wrong to suggest, as the Court does, that Antarctica is "a place that has no law," ante, at 201.[13] The relevant substantive law in this case is the law of the State of Oregon, where petitioner resides. As was well settled at English common law before our Republic was founded, a nation's personal sovereignty over its own citizens may support the exercise of civil jurisdiction in transitory actions arising in places not subject to any sovereign. Mostyn v. Fabrigas, 98 Eng. Rep. 1021, 1032 (K. B. 1774). See also Dutton v. Howell, 1 Eng. Rep. 17, 21 (H. L. 193). This doctrine of personal sovereignty is well recognized in our cases. As Justice Holmes explained in American Banana 213 U.S. 7 : "No doubt in regions subject to no sovereign, like the high seas, or to no law that civilized countries would recognize as adequate, such [civilized nations] may treat some relations between their citizens as governed by their own |
Justice Stevens | 1,993 | 16 | dissenting | Smith v. United States | https://www.courtlistener.com/opinion/112827/smith-v-united-states/ | some relations between their citizens as governed by their own law, and keep to some extent the old notion of personal sovereignty alive." at 355-35. *213 Justice Holmes was referring to the assertion of extraterritorial jurisdiction by the United States rather than an individual State, but it is clear that the States also have ample power to exercise legislative jurisdiction over the conduct of their own citizens abroad or on the high seas. As we explained in 313 U.S. 9 : "If the United States may control the conduct of its citizens upon the high seas, we see no reason why the State of Florida may not likewise govern the conduct of its citizens upon the high seas with respect to matters in which the State has a legitimate interest and where there is no conflict with acts of Congress." at 77.[14] Surely the State of Oregon, the forum State, has a substantial interest in applying its civil tort law to a case involving the allegedly wrongful death of the spouse of one of its residents. Certainly no other State has an interest in applying its law to these facts. Moreover, application of Oregon's substantive law would in no way conflict with an Act of Congress because Congress has expressly subjected the United States to the laws of the various States for torts committed by the United States and its agents. It is thus perfectly clear that were the defendant in this case a private party, there would be law to apply to determine that party's liability to petitioner. Given the plain language of 274, I see no basis for the Court's refusal to follow the statutory command and hold the United States "liable in the same manner and to the same extent as a private individual under like circumstances." *214 IV Petitioner's action was filed "in the judicial district where the plaintiff resides," as 1402(b) authorizes; there is, therefore, no objection to venue in this case. Because that provision would not provide a forum for a comparable action brought by a nonresident alien, the statute contains an omission that is no stranger to our law. In our opinion in Brunette Machine Works, 40 U.S. 70, we identified examples of "cases in which the federal courts have jurisdiction but there is no district in which venue is proper" and stated that "in construing venue statutes it is reasonable to prefer the construction that avoids leaving such a gap." (Emphasis added.) Neither in that case nor in any other did we suggest that a venue gap should be avoided by adopting |
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